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EXECUTIVE SUMMARY The South Asia Market is witnessing a strong growth in the automobile sector. Malaysia is one of the most stable economies in the South East Asia. Although until now Malaysia was following strict government regulation to promote national brands but it has now opened up its market under National Automotive Policy 2006 to promote Malaysia as a manufacturing hub for automobiles and also to increase the presence of foreign automobile players in the market. As per the Malaysian Automotive Association (MAA), sales of commercial vehicles are expected to grow 4.6% to 68,000 units in 2012 from 65,010 units a year earlier. Moreover, Tata Motors has set up its Pick Up truck manufacturing in Thailand and is looking at expanding in Malaysia. This report looks at the feasibility study and entry strategy for Tata Pick Up truck Xenon to enter in Malaysia.
4. 4 | P a g e BACKGROUND Traditionally, the pick up vehicle market in Malaysia was dominated by Toyota Hilux and the Ford Courier. These were just utility vehicles for people to carry heavy tools and machinery. The first company to add comforts and good looks in the pickup segment was Ford Malaysia with the Ranger in nineties. Mitsubishi launched Storm in the market which became Ranger‟s top competition. Almost a decade after the introduction of the Ranger, Nissan launched the Frontier. Toyota made few changes in the Hilux to suit city drivers, and Mitsubishi launched Triton. Also Isuzu launched D-Max in the pickup truck category. As of now there are around eleven major players in the Pick Up category in Malaysia. The breakup of the pickup segment is given in the graph below in which Toyota leads with almost 50% market share of the market. MACROECONOMIC ANALYSIS Source: http://www.cbt.com.my/2012/04/03/sedans-are-outlifestyle-cars-are-in/
5. 5 | P a g e The macro economic analysis of any country can be done through a PESTEL analysis and the cultural analysis can be conducted using Hofstede Analysis. PESTEL Political Factors: Malaysia is a constitutional monarchy with a parliamentary system of government. Political system is dominated by native Malays and though there are
5% in sales during 2011 and it is expected to increase to 615000 units in 2012. Environmental Factors: Energy efficiency is given utmost importance and the Government encourages such cars. Domestic investments in automotive industry amounted to RM 1350. the freeze on issuance of new manufacturing licenses will be lifted for pick-up trucks and commercial vehicles. 6 | P a g e indicates the availability of huge labour force. a competitive but collaborative governance is prevailing in Malaysia.3 – 3.4 million contributing to 70% of the total investment. B – 150%-200%.5% (est. It takes just 11 days to start a business in Malaysia as against the 37 days it takes in China. It stands at 4th place in protection of its investors through effective investment and security laws. HOFSTEDE CULTURE . Imports of Commercial MPVs from ASEAN countries will be subject to only 5% import duty as they are declared as ASEAN Free Trade Area (AFTA).Less than 50% Technological Factors: Innovation and new technologies in manufacturing has improved the productivity by 44% between 2001 and 2006. Social Factors: Owing to its near-universal primary enrolment.tensions among the different races. Legal Factors: According to National Automotive Policy (2012). Fig: % of income against age group A – Above 200%. lesser the political risk) is given for Malaysia which shows that political conditions are stable and conducive for business in the country. Automotive industry in Malaysia registered a marginal decrease of 7. 2012 IMF).8% in 2009. The average per capita disposable income income is $ 4552. Malaysia is ranked 23rd out of 183 countries in the World Bank‟s Ease of Doing Business 2010 report. In spite of the slow economic growth. C. the unemployment rate is only 3% which 6. (The Malaysian Automotive and Supplier Industry. D.100%-150%. Malaysia‟s literacy rate stood at 92. 2012) The real GDP growth rate is estimated to be 5 % in 2012 and the inflation will be 3. A political risk index of 8 on a scale of 10 (Higher the index.50%100%. E. Excise and duty tax exemptions are granted for hybrid energy efficient cars. Economical Factors: Malaysia is the third largest ASEAN automobile market.
Given below is the framework of Global Market opportunity Analysis. with the Xenon having been launched in Thailand in 2008. Spain and South Africa. South East Asia. Tata Motors entered into joint venture with Thonburi Automotive Assembly Plant Company of Thailand to manufacture and market the company's pickup vehicles in Thailand. 9 | P a g e market slowing down owing to the increasing costs of ownership and the ever. Thailand. Sr. Africa. CIS. Further. 7 | P a g e Malaysia Culture is a very high context culture where lot of emphasis is given on relationships.increasing cost of fuel. it has franchisee/joint venture assembly operations in Bangladesh. BUSINESS ENVIORNMENT ANALYSIS 8. Russia and South America. 8 | P a g e The business environment analysis will be done by analyzing if there is a market for TATA Xenon in Malaysia. No Facility Acquired in Collaborator Manufacturers 1 UK 2008 Jaguar Land Rover LV & SUV 2 South Korea 2004 Daewoo Commercial Vehicles Company Trucks 3 Spain 2005 Hispano Carrocera Bus & Coach 4 Brazil 2006 Marcopolo Bus & Coach 5 Thailand 2006 Thonburi Automotive Assembly Plant Company Pickup vehicles 6 South Africa 2008 Tata Africa Holding (Pty) Ltd Medium and heavy commercial vehicles In 2006. 7. Ukraine. and Senegal. the Middle East. it is important for Tata to leverage on its brand image and build a relationship with the customers. South Asia. With a deep understanding of economic stimuli and customer needs. Therefore. and the ability to translate them into customer-desired . South Korea. Tata is now looking for greener pastures abroad. The new plant of Tata Motors (Thailand) has begun production of the Xenon pickup truck. GLOBAL MARKET OPPORTUNITY ANALYSIS: TATA MOTOR‟S ORGANIZATIONAL READINESS Tata Motor‟s is one of India‟s largest car manufacturer With the Indian car 9. Tata Motors is an international motor manufacturer and has a global footprint with its commercial and passenger vehicles already being marketed in several countries in Europe. Tata Motors currently has manufacturing facilities in the UK.
12 | P a g e INDUSTRY MARKET POTENTIAL: Malaysia has a growing potential for Pick Up trucks. After Singapore. with bilateral trade in goods reaching 31. They have introduced trade barriers and high import tariffs on foreign brands of vehicles. there has been relatively no major standout player in the pickup truck market.offerings through leading edge R&D Tata Motors is definitely ready to enter into a new market. Perodua and Toyota. Together. 11 | P a g e 12. and with Thailand and Malaysia sharing similar economic and geographic backdrops. recently the government has taken certain measures to reduce trade barriers. However. The commercial vehicle break up is given in the figure. The automobile customer market is the biggest in Malaysia in South-East Asia due to the recently increased spending power of the consumers. With the Xenon already a success in Thailand. Proton and Perodua. Traditionally Malaysia has protected its auto industry from foreign competition. To add to it with Tata‟s Xenon manufacturing facility in Thailand. these two companies have dominated the auto industry commanding close to 59% of the local mid size car market. which have protected its two national carmakers. 11. (Reference: “Market Watch 2012” The Malaysian Automotive and Supplier Industry) The graph by Frost and Sullivan below shows that Malaysia is a steady market to enter into. knowledge-based and capitalintensive economy. this market seems a very good market to penetrate. the Xenon seems a perfect fit. due to its obligations in the World Trade Organization (WTO) and in the ASEAN Free Trade Agreement (AFTA) Although the mid car segment is still dominated by the likes of Proton. It is one of the 20 largest trading nations worldwide. Malaysia is EU„s second largest trading partner inside ASEAN. Pickup forms the biggest segment in Commercial . TARGET MARKET – WHY MALAYSIA 10. 10 | P a g e Malaysia has traditionally been a middle-income country but now Malaysia has transformed itself into an emerging multi-sector economy spurred on by high technology.9 billion Euros in 2010.
2012). Most customers are small business 14. 13. 14 | P a g e owners who requires to transport goods locally i. COMPANY INTERNAL ANALYSIS: 5C‟s ANALYSIS A. Tata Motors can also leverage the ASEAN free trade agreement (FTA) as they have an assembly plant in Thailand. Tata motors forsee growth potential in the commercial vehicle segment as this is a growing market in Malaysia and also because of lower competition from local players. the price can be made very competitive. Nano Sport Utility vehicles: Tata safari Commercial vehicles: Tata Sumo. Collaborators: Tata can get into contract agreements with the local distributors in Malaysia. this will attract more customers.e. Tata will introduce Tata Xenon as there is an assembly plant in Thailand and can be directly imported from Thailand. Tata Motor‟s product line includes: Passenger vehicles: Tata Indica.1% YOY compared to June 2011 quarter (Malaysian Automotive Association.vehicles. Tata Motors saw immense potential in the Land Rover as a premium Sports Utility Vehicle and have turned around the fortunes of the LR in three years. inside the cities and sometime outside the city borders. In Malaysia. Tata Xenon Trucks & Buses Tata motors acquired Jaguar and Land Rover business from Ford Motors. and also helped boosting the brand image of Tata Motors. this acquisition helped them to gain entry into European market. Also. Company: Tata Motors is a subsidiary of Tata group. Bhd to gain entry. Also. Indigo. This gives a good opportunity to get into pickup truck market. Tata can partner with Isuzu Hicom Malaysia Sdn. 13 | P a g e B. Source: Malaysian Automotive Association. It can also get into agreement with component manufacturers for supplying spare parts and other critical components. Customers: The commercial vehicle market has increased by 12. The urban . As this truck will be imported from Thailand and this will be under the laws of FTA. C. 2012 As in the above graph pickup truck share is higher and is about 68%. Also there is a big difference on the tax levied between SUV and pickup trucks which is giving a thrust to the growth of lifestyle pickup trucks as compared to SUV segment.
15. Isuzu and Toyota Hilux. Jan 2012 E. Initially marketing and customer service can be kept in-house as it‟s crucial to make an early impact in the market. High importance since the cost and quality of manufacturing is essential 16. Since its a established product therefore there is not much R&D needed. 16 | P a g e Likelihood of Internalizing rather than outsourcing High importance for an already proven product with continuous innovation to customize to the local market Low importance as the process is already outsourced at Thailand Low importance since the product is manufactured at Thailand Geographic configuration: Home or abroad Concentrated at Thailand Produced at Thailand Concentrated at Thailand Marketing & Branding Sales. Competitors: The main competitors are: Mitsubishi Triton. Currently outsourced in Thailand. the component and manufacturing as of now is being done in Thailand plant. D. The market share is as as per the attached graph. VALUE CHAIN ANALYSIS R & D Design Component Manufacturing Manufacturing or Assembly Importance of this activity to the firm as a strategic asset Low importance : Already proven product to be launched Low importance. Climate: The climate or macro environment factors are as detailed in the PESTEL analysis. The sales. If the market size increases considerably a manufacturing plant can be started in Malaysia which is encouraging companies to set up its manufacturing facilities. Nissan Navara. Source: EU Delegation to Malaysia – Trade & Economic Section. 15 | P a g e VALUE CHAIN ANALYSIS: The Analysis below summarises which activities are important for Tata and should be kept in house and which can be carried on in Thailand in the initial period or can be transferred to third party and dealers.Malaysians are also driving Pickup. Distribution & Logistics Customer Service Importance of this activity to the firm as a strategic asset Very important for the launch of a new product Very important as the products are imported from Thailand Very important as this is a new product Likelihood of Internalizing rather . distribution and logistics can be shifted to outside vendors. It has a become a fashion statement in the Malaysia automobile market.
however recently the government has taken certain measures to reduce trade barriers. The 4Ps have been given in the analysis below. 18. 18 | P a g e PARTNERSHIP STRATEGY: Strategic partnership with Dealers and third party logistics to take advantage of the following skills Existing customers in terms of loyal customers Sales and service expertise Reputation/brand equity Market access/knowledge CONCLUSION Though the market in Malaysia has traditionally been a closed one to foreign carmakers.than outsourcing High importance as it is for a product launch for a totally new market Medium importance since the product is distributed in Malaysia High importance as the product is new to the market Geographic configuration: Home or abroad Branding and Marketing concentrated in Malaysia Mainly concentrated in Malaysia and partially at Thailand in terms of exports Customized to suit the market with local call centres SWOT ANALYSIS 17. the Tata Xenon. Add to this the detailed analysis done above. Also. . it clearly shows that Tata Motors will only stand to gain by entering the Malaysian market with its successful model. but there is a growth potential for pickup trucks and increase in consumer base. owing to the robust nature and reputaions of Tata Motors and their cars in general Tata Motors seems a really strong player to be entering the Malaysian pick-up truck market. thanks to the World Trade Organization (WTO) and in the ASEAN Free Trade Agreement (AFTA). 17 | P a g e COUNTRY ENTRY STRATEGY: 4 Ps Though the automotive policy of Malaysia is still not very open as compared to other ASEAN countries.
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