A REPORT

ON Strategic Outlook for Fiat India Automobiles Ltd.

By Abhishek Bhardwaj 0901200065

ICFAI Business School

A REPORT ON Strategic Outlook for Fiat India Automobiles Ltd.
By Abhishek Bhardwaj 0901200065

A report submitted in partial fulfillment of the requirements of MBA program of the ICFAI University, Dehradun

Date of Submission: 7th March, 2011.

SUBMITTED TO: Prof. Ashwini Sovani, IBS, Pune

Acknowledgment
Through this acknowledgement, I express my sincere gratitude towards all those people who have helped me in the preparation of this project, which has been a learning experience.

I am highly obliged to Prof. Dhananjay Keskar (Director, IBS Pune) for providing me an opportunity to study in this esteemed institute and go through the rigorous MBA program of 2 years. I am highly indebted to him for the all guidance and support.

I wish to thank my Faculty Guide- Prof. Ashwini Sovani (Faculty, IBS PUNE) for her continuous support and time. He has been a guiding spirit all throughout this project and has given all the information which made it possible for me to make this project. I express my sincere thanks to him who guided me throughout the project and gave me valuable suggestions and encouragement for my continuous improvement.

Finally, I owe my special thanks to my family & friends who are my source of encouragement and inspiration and without their help and support, this project would not have shaped up so beautifully. I wish to thank them for the entire morale boost that they gave in times of need.

Table of Contents
I. II. III. IV. Abstract Introduction Report References

Abstract
The report explores reasons for the poor performance of the Italian automobile company Fiat in India. It examines in detail the company's efforts to make its Uno, Sienna, Palio, Grande Punto and Linea cars a success. The report also takes a look at the changes made by the company for ensuring the success of its car, the Palio, launched in September 2001. The report is so structured as to enable one to understand how certain mistakes on the marketing, product development and the strategic alliance fronts resulted in Fiat's poor performance over the years in the Indian car market. One should be able to understand the rationale behind the measures taken by the company for ensuring the success of its various cars. Credited as one of the founders of the European automobile industry, Fabbrica Italiana Automobili Torino (FIAT) SpA was established in 1899 in Turin, Italy by a group of individual investors. FIAT's automobiles achieved instant popularity, not only in Italy, but also internationally. Over the next century, FIAT consistently followed a two-pronged growth strategy: penetration of foreign markets and focus on innovation. The innovation strategy fuelled the company's diversification plans into agricultural and construction equipment, commercial vehicles, metallurgical products, components, production systems, aviation, publishing and communications and insurance. In March 1996, Fiat signed an agreement with PAL to import and assemble CKD kits of the 999cc car 'Uno.' Uno, launched by FIAT in 1983, was the most successful car in the company's history. Four versions of the Palio were launched in September 2001; the prices ranged from Rs 0.349 million to Rs 0.499 million. Analysts remarked that these models were priced competitively against the Santro and the Zen. The entry-level models of the Palio (EL) and the Santro cost Rs 0.349 million and Rs 0.334 million respectively. Fiat claimed that it offered a net Rs 26,000 worth of content more than the Santro. The market seemed to agree with Fiat as the car was received rather well. In just two days, over 1100 cars were sold. This prompted Fiat to increase the daily production at its Kurla plant in October 2001. Bianchi said, "While daily production at the Kurla plant has already been increased from 50 to 70 cars a day, we plan to increase it further to 100 cars a day by midOctober and 150 by November-December." The company was also planning to add a third shift and produce 220 cars a day.

Introduction
³We will show what Fiat means, in terms of technology, service, deliver, cost, finance, mobility solution to the customer.´

- Maurizio Paolo Bianchi, Managing Director (Fiat India), in October 2001. The Launch of Palio

History 
The history of Fiat began many years ago, at the dawn of Italian industrialization.  Giovanni Agnelli founded Fiat in 1899 with several investors.  Its first car the 3 ½ CV strongly resembled contemporary Benz, and had a 697 cc boxer twin engine.  In 1910, Fiat was the largest automotive company in Italy.  By the early 1920s, Fiat had a market share in Italy of 80%. In 1922, Fiat began to build the famous Lingotto car factory the largest in Europe up to that time which opened in 1923. In India, the company was established in 1905, as Bombay Motor Cars Agency as its sales agent. Fiat Automobiles signed a licence and servicing contract with Premier Automobiles Ltd, to manufacturing and selling of 1100 and 1100D Fiat Padmini cars. Fiat has achieved a high level of localisation for all its cars, and is making world-class cars available in India at even more competitive and affordable prices. Fiat Automobiles owns the most-admired and sought-after models worldwide, including the Fiat Lancia, the Ferrari, the Maserati and the Alfa Romeo. Fiat is the only automobile manufacturer in the world that has won the coveted European Car of the Year award nine times. It is also the only company in the world that manufacturer¶s recyclable car.

Report
Fiat India has been mulling over to adopt a new marketing strategy for the Indian market. Despite having some highly competitive cars in its India portfolio, the sales figures of the company remain moderate. Fiat Punto The company currently sells two fairly competitive cars in India including hatchback Fiat Punto and sedan Fiat Linea but has managed to sell mere 24,806 units in the financial year 2009-10, which is a very small number considering the total industry sales of 1.5 million units during the same period. As per the industry experts, the performance of Fiat India during the last one year could have been better if it would have focused more on the sales and promotions of its under deserving cars like Fiat Punto and Linea in the Indian market. According to Mr. Rajeev Kapoor, MD of Fiat's India, that the sales of Fiat India could have been better, considering it has two competitive products (Linea and Punto), both of which are available in petrol and diesel engine options. He further reiterated that the numbers could have been better.

The company currently sells its cars in India through 175 Tata Motors dealerships which is a 50:50 joint venture partner of Fiat in India. Where the company had reported a robust growth of 208 percent in the Indian market in FY 09-10, its market share is still mere 1.6 percent in the country. However, the company is continuously working on reaching more and more customers in India by enhancing its dealership base and increasing its manufacturing facility in the country. The new marketing strategy of the company includes, creation of separate sales teams dedicated to its different car to make sure that a single model can be pin-pointed and sales can be improved. This would indeed be a trendsetter in the Indian automobile industry. From the very beginning, the strategy of Fiat Powertrain Technologies has been to unify the innovation capabilities and technological expertise before spread among Fiat Auto, Iveco, Centro Ricerche Fiat and Elasis. Through that strategy, FPT is capitalizing on the technological excellence of Fiat engines and transmissions to approach the open market, gaining and increasing shares through noncaptive customers.

Of course, the base business and the starting point is "captive," as Iveco, Case New Holland (CNH) and Fiat Auto are presently the major customers, however, this captive knowledge can help us to successfully approach and manage new customers.

The open market business is implemented on two parallel channels. One is retail, based mainly on sales through the company's network of distributors and dealers. Established by Iveco-Aifo and Iveco Motors, this retail channel is able to sell tailored engines to small OEMs. The second path to market is through the KA channels, structured to serve global OEMs directly with an internal sales force, operating in the automotive, industrial and power generation market segments.

FPT's strategy of doubling its volumes by 2010 has been approached by Sales & Marketing by
focusing its effort on the open market, prioritizing areas that will give the company a global presence where it will structure the FPT presence by replicating the central structure.

On the KA side, one of the first large contracts of strategic value for the new organization has been the Daimler/FPT agreement for the supply of 78,000 engines per year for the Canter light commercial vehicle of Mitsubishi Fuso. This deal has been followed synergistically by Sales & Marketing, application engineering and manufacturing demonstrating how FPT can work as one company, thereby giving its global players multifunctional support to cover all their different needs.

As mentioned, the FPT approach is not restricted to a limited number of large customers, but with its network tries to gather a portfolio of medium-sized OEMs evenly distributed in the various areas of the world. In Europe, the Fiat Group is traditionally present and our strategy now is to consolidate and extend the former Iveco Motors network, growing the penetration especially in the Eastern European countries. A special effort is also made in the Mediterranean coastal area where the current network of local shops will be improved to provide an even better assistance to FPT marinized engines that are powering both pleasure hulls an professional fishing boats.

North America is another marketplace of strategic interest, given both its size and the number and importance of its OEMs. FPT North America has already established a network of local dealers and a decentralized R&D and Engineering Center is going to open in Burr Ridge, near Chicago, to assist local OEMs. CNH, one of the largest OEMs belonging to the Fiat Group, is considered the starting point to develop this approach.

In Latin America the situation is different, as the Fiat Group also has a large footprint in Betim, near Belo Horizonte that enables the group to be a market leader in the automotive sector. FPT is benefitting from this industrial footprint to produce industrial diesel engines of the Nef and of Cursor families, while gearboxes and axles are produced in Cordoba. The main challenge in these countries, protected by high import duties, is to produce engines with high local content in order to satisfy OEM needs through local production.

China, India and the Far East are the fastest developing countries in the world and FPT decided to be present there through a joint venture with Tata, the market leader in the Indian manufacturer for India. That led FPT to produce industrial engines in Pune for both Tata and also to serve Indian OEMs producing agricultural and construction machinery, as well as generating sets.

A similar deal was concluded in November 2006, with Iveco, SAIC and Chongching for the construction of an engine manufacturing plant in the Chongching industrial area. This plant is sized for the production of 100000 engines per year to be distributed through three different channels. These include the two Fiat Group companies already well established in China, Iveco and CNH; a growing group of Chinese OEMs of off-highway machines that are distributed in the domestic Chinese markets; and for export to the rest of the Far East and Australia, which are served through the Shanghai hub.

Finally in Russia, a similar deal is in the advanced planning stage with a local player. The engine production pole will serve the growing group of Russian OEMs mainly dedicated to develop mobile equipment for the internal Russian marketplace. At the time of writing, the joint venture is not signed, but the agreement should be concluded within the first half of 2008.

The Launch of Palio
In September 2001, Fiat India Automobiles Limited (Fiat) held a lavish function in the Indian coastal state of Goa. The function, featuring performances by leading Indian musicians Louis Banks and Sivamani, who had composed music especially for this event, was held to celebrate the launch of Fiat's much-awaited car, the Palio. Designed by well-known Italian automobile designer Giorgetto Giugiaro,1 the Palio was already a huge success in countries like Brazil and Argentina.

The media termed the high-profile launch of Palio, backed by a Rs 120 million endorsement deal with leading Indian cricket player Sachin Tendulkar (Tendulkar), as a desperate attempt by the Italian automobile giant to establish itself as a serious contender in the Indian car market. The Palio was expected to boost the company's sales, which had been declining for the past few years. Known as the Fiat Group's 'world car', the Palio was being seen as Fiat's last chance to tackle its accumulated losses of Rs 10 billion.2 Fiat did appear to be taking a 'last chance' with this new car. It had dedicated more than 83% of its total installed capacity for the production of the Palio. The company had invested an additional $ 250 million at its Kurla, Maharashtra, plant for the new car. Unlike some of the other small cars that had been adapted to suit tough driving conditions in India, the Palio had been designed from scratch with these conditions in mind. Fiat had even decided to reduce the combined production of its other models - Uno, Siena and Siena Weekend - to 10,000 per year. Instead, the company planned to build 50,000 Palios during the first year of its launch. It was reported that the company was ready to stop producing the Uno completely, if necessary. Company sources revealed, "The decision regarding whether the Uno should be continued will be taken after the Palio is launched and after observing the performance of the former car." Fiat had also postponed the launch of the Multipla (part van, part car) for the time being. Fiat India's Managing Director Maurizio Bianchi was extremely optimistic regarding Palio's prospects, "With the Palio we plan to give the widest range possible in the B-segment.3 We will launch with the 1.2 and 1.6-liter petrol (versions) and by 2003 offer a 1.9 diesel (version). We will also try to give a wide range of options to suit every pocket and taste. In this way we will be able to span the complete spectrum of the B-segment which today accounts for 40% of the Indian market."

Although Bianchi was optimistic, his skeptics far outnumbered his supporters. The reasons were not difficult to understand, as the company's five decade long existence in the Indian automobile market had only produced failures. In spite of having invested over Rs 30.1 billion since 1996 in the country, Fiat's market share in 2001 was only 1.3%.

The Failed Resuscitation Attempts
UNO
In March 1996, Fiat signed an agreement with PAL to import and assemble CKD kits of the 999cc car 'Uno.' Uno, launched by FIAT in 1983, was the most successful car in the company's history. Uno was launched in 1996, amidst much fanfare and acquired around 3,00,000 bookings in just three months. However, in June 1996, just when the company had closed the bookings, the employee union at the Kurla plant forced a lockout. The lockout was the result of a go-slow agitation led by militant trade union leader, late Datta Samant, started in April 1996. The lockout was lifted in November 1996, after a majority of the workforce defied the Datta Samant-led union and opted to go back to work. As a result of the lockout, production suffered greatly and the company could not deliver the booked vehicles in time - only 617 cars were delivered by the end of 1996. The non-delivery of the vehicles upset many consumers and around three-fourths of the orders were cancelled.

"This is the beginning of what promises to be a far-reaching, long-term relationship between Fiat and Tata."
- Ratan Tata, Chairman, Tata Motors, in 2006.

"While Tata Motors will get technology to develop economically priced small cars and entry-level sedans and an entry into untapped markets, Fiat India can continue to have a presence in the Indian market without much investment."

- Kalpesh Parekh, Auto analyst, ASK Raymond James,3 in 2006.

In July 2006, major Italian automaker Fiat Auto S.p.A. (Fiat Auto), and the Indian auto major Tata Motors (TM), signed a Memorandum of Understanding (MoU) to form a joint venture to produce passenger cars, engines, and transmissions in India. These products were intended both for the Indian and the international market. Earlier, in January 2006, the two companies had signed a marketing and distribution agreement under which TM marketed select models of Fiat cars through a few of its dealers. The joint venture was seen as a major development in the Indian automobile industry. Both TM and Fiat Auto had a long history in automobile manufacturing. Until the 1990s, TM was mostly a manufacturer of commercial vehicles.

It entered the passenger car market in the 1990s with the Indica, a 1400 cc small car44 with a diesel engine, which went on to become a success and placed TM among the top three passenger vehicle manufacturers in India. However, in 2002, because of a fall in the demand for commercial vehicles, TM reported a loss. As a part of its turnaround strategy, it improved its internal efficiencies and also decided to focus on overseas markets to reduce the impact of demand fluctuations in the domestic market. In 2003, TM returned to profitability. By 2005, it had a market presence in Thailand, Senegal, South Africa, Turkey, Europe, and West Asia.

However, in spite of its impressive growth, TM was still a small player at the global level. Fiat Auto, which built its first car in 1899, also had an illustrious history in the automobile world. After World War II, it became a major manufacturer of small cars in Italy, and later on in Europe. Until the 1990s, Fiat Auto dominated the small car market in Europe and other parts of the world.5 In India, Fiat cars were imported even as far back as 1905. In the 1950s, the Fiat

Group entered into a license agreement with India-based Premier Automobiles Ltd. (PAL)6 to manufacture its cars. Fiat Auto formally entered the Indian market in 1997 through a joint venture with PAL. In the early 2000s, Fiat Auto ran into losses as it was slow in adapting to the changed economic environment7 in Italy in particular and Europe in general.

INITIAL IMPRESSION OF PADMINI
Fiat Padmini and Ambassador were the only cars available in India and the Indian consumers were really bored of those cars and wanted to be relieved of these cars. That generation dint like the cars but still used it as there was no other option. The first mistake that fiat made was in those times, it had the first mover advantage in the Indian market but it did not capitalize on it, in fact the brand image of fiat kept on deteriorating. The consumers in India were totally fed up by fiat cars. The impression that it created in those times was that of a high maintenance, ugly cars. this impression got carried to the next generation of users after 1991 when auto companies rushed through India and fiat became the un-preferred brand. The impression it created in the early period carried on till a long period of time.

GENEARATION AHEAD OF ITS TIME
The fiat CEO himself once admitted that they have been ahead of their times in a statement made ³we were generations ahead´. They bet heavily on the success of Palio as a car, which in fact was a success in the beginning but then couldn¶t continue for a longer period of time. After 3-4 years of the Palio¶s launch cars like Swift and Getz in the same category were launched and have been successful.

RUMORS OF CLOSURE DURING RELAUNCH
After Padmini¶s launch fiat didn¶t launch any car for years together, but then it introduced cars under the brand of Peugeot and also launched the UNO. Peugeot faced a lot of problems in its initial years of launch. Peugeot got thousands of pre launch bookings in those times, but after the bookings were done a rumor spread that fiat is winding up its operations in India and people¶s money would be lost, this created a panic.

Company Overview
Fiat India Automobiles Private Limited (FIAPL) is a 50-50 Industrial Joint Venture between Fiat Group Automobiles and Tata Motors Limited originally incorporated on January 02, 1997. Currently manufacturing the Palio Stile 1.1 and 1.6 models, premium Fiat cars such as the Grande Punto and Linea are expected to boost sales soon in the B and C segment from the facility within. Also owns and controls five internationally renowned brands: - Fiat Automobiles, Alfa Romeo Automobiles, Lancia Automobiles, Abarth and Fiat Light Commercial Vehicles & Ferrari.

India being a major market for small cars, Fiat Auto decided to revive its operations in the Indian market. And the joint venture with TM was a step in that direction. Most analysts were of the opinion that the joint venture would benefit both parties; TM would gain in terms of better accessibility to technology, design, and global markets, while for Fiat Auto, it would mean a larger presence in India, one of the world's fastest growing auto markets, without heavy investments. However, there were others who felt that the joint venture would end in brand dilution and product cannibalization for both parties. Also, with Honda, Toyota, GM, Mitsubishi, M&M/Renault, Nissan, Skoda, etc., chalking out plans to enter the small car segment, especially the premium small car segment, it seemed likely that the TM-Fiat Auto joint venture would face intense competition in the coming years.

Fabbrica Italiana Automobili Torino
Global Overview
FIAT S.p.A, Turin based Large Industrial Group Founded in 1899, by Giovanni Agnelli & Group Presence in 190 countries across the world 118 R&D Centers and 203 Plants World Wide Refined its focus on the Cars

Fiat Automobiles India Limited
History
FIAL was originally incorporated on 2 January 1997. The company presently employs about 600 employees and is located at Ranjangaon in the PuneDistrict of Maharashtra. The definitive agreement of the Joint Venture between Fiat and Tata was signed on 19 October 2007. The board of directors for this company comprises five nominees each from Fiat and Tata[1]. Earlier, Fiat use to sell the 1100, 124 and Uno in India which was manufactured by Premier Automobiles Limited.

Manufacturing Facilities
FIAL has a manufacturing plant at Ranjangaon, Maharashtra, which has an installed capacity to produce 100,000 cars and 200,000 engines, besides aggregates and components. The company plans to double the production capacity for both car units and engines in the next few years.

Sales and Service Network
FIAL currently has 175 dealerships in 130 cities across India. It uses the Tata Motors sales and service network which is third largest after Maruti Suzuki and Hyundai. All Fiat cars in India are sold and serviced by Tata Motors.

Fiat India Automobiles Private Limited
Accelerating collaborative data management with Teamcenter

The Client
Fiat India Automobiles Private Limited (FIAPL), now a 50-50 industrial joint venture between Fiat Group Automobiles S.p.A. and Tata Motors Limited, was originally incorporated as a company on January 2, 1997. Fiat owns and controls five internationally renowned brands: Fiat Automobiles, Alfa Romeo Automobiles, Lancia Automobiles, Abarth and Fiat Light Commercial Vehicles. Tata Motors Limited, the other partner to the joint venture, is India¶s largest automobile company, with revenues of 8.8 billion in 2007-08. It is the leader in commercial vehicles for compact, midsize car and utility vehicle and among the top three in passenger vehicles, Tata Motors is the world¶s fourth largest truck manufacturer, and the world¶s second largest bus manufacturer. The state-of-the-art Fiat facility at Ranjangaon, India, has an installed capacity to produce 100,000 cars and 200,000 engines, besides aggregates and components. The company plans to double the production capacity for both car units and engines within a few years of the new plant¶s opening. Fiat leverages the facility¶s vast resources to manufacture the Palio Stile 1.1 and 1.6 models, as well as premium cars such as the Grande Punto and Linea.

The Challenge
Fiat India Automobiles Private Limited (FIAPL) was taking its production capabilities to the next level by building an enormous, cutting-edge manufacturing facility in Ranjangaon, India. The massive plant was set to provide direct and indirect employment for more than 4,000 people. Apart from Fiat cars, the facility was designed to produce Tata Motors passenger and nextgeneration cars with a total investment exceeding 650 million euros. With the enormous complexity of the operations both at the Ranjangaon plant and other connected locations, FIAPL needed a better way to collaborate and share data between its design and manufacturing teams. FIAPL used Teamcenter Automotive Edition (TcAE) as its primary data management and product lifecycle management (PLM) solution in the Ranjangaon plant. The automaker determined that in order to overcome barriers to collaboration brought about by operating in

disparate locations, it needed to standardize and enhance TcAE usage at all production sites.

The Solutions
FIAPL called on Tata Technologies to align its TcAE solutions with its manufacturing objectives, and to improve its staff¶s TcAE usage methods for better collaboration. After careful analysis of the design and manufacturing processes and technologies used by FIAPL, Tata Technologies devised a solution to allow collaborative management of NX CAD files in Teamcenter. Through multi-site Teamcenter configuration, Tata Technologies extended this capability to FIAPL¶s other locations for complete enterprise connectivity. Tata Technologies provided FIAPL with a wide range of valuable services during the PLM project, including: ‡ Configuration of Teamcenter at multiple sites for seamless interaction with NX and Oracle platforms ‡ Installation of Teamcenter in the client¶s Windows systems ‡ Definition of a new query builder and importation of the Fiat query builder to enable searches by Fiat part number ‡ Implementation of business rules and maintenance ‡ Creation of revision rules according to Fiat methodology ‡ Importation of product data from different Fiat car models

The Immediate Benefits
Immediately following the successful multi-site TcAE configuration, FIAPL workers began effectively managing data across all connected locations in real time while maintaining the central control and release system. The linked databases ensured that every employee from the design room to the manufacturing shop floor was using updated, accurate product data. This streamlined exchange of critical information led to widespread collaboration during production of both Fiat and Tata Motors vehicles.

The Long-term Benefits
The Teamcenter PLM solution increased FIAPL¶s productivity and brought greater efficiency to its manufacturing processes. FIAPL design engineers easily modify and improve products in Teamcenter, which results in much faster time to market. Further long-term benefits include: ‡ Improved global collaboration between FIAPL design and manufacturing teams ‡ Reduced product development costs due to reuse of product data ‡ Enhanced data management capabilities with Teamcenter¶s dynamic product information databases ‡ Greater visibility over manufacturing activities, leading to better decision-making

Why Tata Technologies?
Tata Technologies has years of experience in selling, implementing and supporting Teamcenter PLM solutions for the world¶s top automotive manufacturers, as well as a strong partnership with Siemens PLM. In addition, Tata Motors is a long-time partner to Tata Technologies. The automaker has leveraged this beneficial relationship on many occasions to ensure that it maintains its competitive edge among its highly regarded peers.

Marketing Strategy FIAT INDIA

Sales Statistics: Indian Scenario
Total Industry Sales 2009-10: 1.5 million units sold FIAT experienced 207% Units growth of Domestic Market Year 84% growth of Exports

Product  Strongest Element of Marketing Mix  Offers cars as Basic Product  Presence in Segment:  Small Car  Midsize Saloon  Petrol and Diesel variants  Petrol and Diesel engine supplies to Tata Motors and Maruti Suzuki India Ltd.  Will supply engines to commercial vehicle manufacturers

Technology

Safety

Engines

Style

Design

Comfort

Awards FIAT Linea
Car of the year award by UTVi Autocar: 2008
Midsize car of the year by both UTVi Autocar: 2009

Midsize car of the year by CNBC Overdrive: 2009
BBC TopGear Medium Saloon 2008 by TopGear

Awards Grande Punto

Autocar Magazine's Coveted Design Award: 2008
Brazil's 'Carro Do anno 2008' (Car of the Year 2008)

Auto Inter-Americana 2008

Market Opportunities & Industry Trends
Huge Population over 1.1 billion signifies large market 100% FDI allowed for the Indian Automotive Sector High Distinctiveness in Demand for all segments of cars Substantial rise in Disposable Income India is expected to be Global Hub for Automobile Manufacturing Passenger Car Segment, expected growth at CAGR of 15% over next 5 years

Business Cycle: Economic Melt Down
Globally Auto industry's growth was poised Growth in Rapidly Emerging Economies (BRIC Nations), although slowed, still outpacing growth anywhere else in the world, as the demographics of REE¶s market, include first time vehicle owners to large extent. Level of car adoption is relatively low, 11 cars in use per 1,000 people.

Competition
Fierce Competition from Hyundai and Ford Maruti Suzuki is market leader with ~50% of share FIAT INDIA is gearing up for High Level Competition FIAT plans to combat Maruti Suzuki¶s ALTO with 1 litre small car, by 2012 FIAT started exporting cars to SAARC nations following the footsteps of Maruti & Hyundai Message to Competitors: Maruti may have 50% market share in India but we are nowhere behind, fight us to maintain the demand.

Factors of Competition

Product Mix
Hatchback Sedan Micro Car Large Variants Within Segment

Spare Parts
More focused issue Easy availability Genuine Parts Competitively Priced

Price
At par with competition Except for 500

Service
Tie-up with TATA Initiated FIAT FIRST

FIAT FIRST

Long Service Interval

Growing SErvice Network

Long Warranty Coverage

24 X 7 Road Side Assistance

Genuine Spare Parts

Sales & Distribution

Efficient Supply Chain
Fiat has a 50:50 JV with Tata Motors, shares their dealer network

Currently sells through 175 dealerships of JV, across 130 Cities
40 Exclusive Dealers

Need to get rid of shared Sales & Service Network

Promotion

Punch Lines Linea: Admiration Guaranteed Punto (Petrol/ Diesel): Crafted for True Fan Punto (90hp): India·s Most Powerful Diesel Hatchback 500: Every FIAT is 500% FIAT

FIAT appointed AICAR as Marketing Advisor in India

Advertising company: Orchard Advertising (sister concern of Leo Burnett India)

Issues to Address
Current Marketing Strategy does not work out Despite of competitive products, sales was moderate Need to increase Exclusive Dealership Network JV may be a possible threat for future Promotion is the weakest part of FIAT INDIA; even FIAT officials admit the fact. There is a need to educate the customers regarding their Hi-Tech Products & competitiveness. Strong Promotion campaigns required to completely wipe out the deteriorated brand image.

SWOT Analysis Strengths
High Quality Products Technology Strong Dealer Network Business Expansion Heavy Investment Century long presence in industry

Weakness
Deteriorated Brand Image Wrong perception about Indian Market Poor Customer Care Spare Part Issues Limited Product Range Insufficient Promotion

Opportunities
Brand Reviving New Market Segments Consumer perception Increased Exclusive Dealership

Threats
Country To Country Policy Competitors Intention Shared Dealer Network Stiff Competition Loss Of Key Staff

Business Model
Business Objective

CRM

Strategic Planning

Passenger & Luxury Cars, SUV, MUV, Commercial Vehicles

Target Markets

Customized promotion Programmes

Dedicated Sales Teams for Models

Separate Areas/ Exclusive Dealer

Increased Manpower

Information

Customer

Training Programmes

FIAT First

Advantages of the Alliance with Tata Motors Ltd.
Even though Fiat India had been present in India for close to a decade, it had the lowest market share among the 11 players - including later entrants like Skoda India - in the growing car market. Though the company's cars like the Palio were initially quite successful, Fiat's image suffered due to its dealers. Fiat customers were reported to have faced problems because of the non-availability of spare parts and lackadaisical customer service. Such problems had an adverse impact on the company's image, and it struggled to compete effectively in the Indian automobile market. The alliance with TM was expected to improve its dealership network and customer service without the company having to make significant investments. The goodwill enjoyed by TM, and the company's reach were expected to improve Fiat's image in India. Even though both firms gained several advantages by co-operating, they also faced significant threats. The TM-Fiat Auto alliance was expected to face intense competition from other automobile manufacturers in India, some of who were in the midst of forming their own alliances. In February 2005, Renault SA formed a 49:51 joint venture with Mahindra & Mahindra Ltd. The alliance was to launch the Logan, a sedan, which would compete against TM's Indigo. Toyota Motor Corp. and its subsidiary Daihatsu Motor Co. Ltd., had plans to launch a new small car for the Indian market. More significantly, MUL was all set to challenge TM's diesel supremacy, by entering the diesel car market in a big way.

Outlook
India was one of the fastest growing automobile markets in the world, with passenger car sales forecast to reach two million units per annum by 2010. As of 2006, small cars made up more than two-thirds of India's passenger car market. Even in the future, at least in the short to medium term, the small car segment was expected to remain the largest segment of the market. Therefore, in spite of the intense competition, the TM-Fiat Auto joint venture was aiming to make an impact in this high-volume segment. "Obviously Tata-Fiat [Auto] JV is entering an over-crowded and a price sensitive segment. But this [small car] segment which contributes to more than 60% of the total car sales will remain a key segment in the Indian car market for many years," said an auto analyst.

References
I. II. III. IV. V. VI. www.fiat.com www.tatamotors.com ICMR case book on Business Strategy Business Standard Newspaper Economic Times Newspaper www.team-bhp.com

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