Professional Documents
Culture Documents
ON
SUBMITTED TO
MR. ADARSH ARORA
Faculty Guide
SUBMITTED BY
AFZAL LODHI
B.Com (H)
Enr. No.A3104608040
ACKNOWLEDGEMENT
I acknowledge the sincere assistance provided to me from several rather
unexpected quarters during the course of execution of this study. It would be a
mammoth task to place on record my gratitude to each and every one of them but a
whole hearted attempt would be made nevertheless, least I be branded ungrateful.
I am very thankful to Mr. AdarshArora, Faculty Guide, ACCF, Amity
University, Noida, U.P. for her valuable guidance and support at all time.
AFZAL LODHI
EXECUTIVE SUMMARY
In this report we study how two big players in the Indian automotive
sector, namely TATA Motors and Hyundai Motors India manage their
sales and distribution system, the pace of growth we had mentioned earlier
led us to select this sector and these companies as they are among the
best performers.
While one company was a truck manufacturer until the early nineties
and the other a late entrant in the mid nineties as a subsidiary of a Korean
Industrial conglomerate. We felt there would be a big diversity between
both these companies in the distribution and sales, diversity in the form of
models and structures.
Contents:
Title:
1.
Executive Summary
2.
Methodology
3.
a)
b)
Information Sources
c)
d)
Limitations
Company Background
1. Brief History
2. Year of Establishment
3. Turnover and other financials
4. Product Mix
5. Market Share
6. Area of operation
4.
Findings
5.
Data Analysis
6.
Conclusion
7.
Recommendations
8.
Annexure
9.
Bibliography
Methodology
A Sector & Players
The sector that we chose for the project is the Automobile sector.
Another reason for choosing this sector was that it covers all the 3
aspects i.e. Distribution network, Service network and Sales functioning.
B Information sources
Primary sources
The primary source of information has been the dealers of both the
companies. They have provided us all data of the distribution, sales and
after sales network in their capacity as channel partners of the concerned
companies.
Secondary sources
The two tools we have used for data collection in this report are:
a: Discussion guidelines
b: questionnaires
D: Limitations
Time constraint
Most interviews with the company sources have been quite short, limiting
the information we could gather due to the demands on their time.
Company Background
A)
History
The Hyundai Santro has been designed and developed in India at the
integrated auto-manufacturing unit at Irrungattukotai near Chennai. This
plant is capable of producing 1, 20,000 cars and 1, 30,000 engine and
transmission systems annually. It also has in built facilities for the
The Company has set up more than 70 dealer workshops that are
equipped with the latest technology, machinery, and international quality
press, body and paint shops, across the country, thereby providing a onestop shop for a Hyundai customer. Hyundai also has a fleet of 78
emergency road service cars - specially equipped Santro that can provide
emergency service to all its customers anytime, anywhere.
TATA Motors Ltd is subsidiary of TATA Sons, the holding company of the
TATA Group, the oldest and among the largest industrial conglomerates of
India.
Established in 1945, TATA Motors entered into collaboration with Daimler
Benz of Germany in 1954 to manufacture commercial vehicles. The
collaboration ended in1969.
The company until the nineties was a player only in the commercial
vehicles segment. In the early nineties the company entered the
passenger car market with the TATA Estate and the Sierra, at the same
time the company reentered into an agreement with Daimler Chrysler for
setting up a JV for Mercedes Benz in India.
The tie with Mercedes ended in the mid nineties and the company started
investing in the development of an indigenous car for the mass. Named the
Indica the car was launched 1998; this car was a totally indigenous product
and also the first in the history of the Indian automotive Industry.
In between the company also introduced the TATA SUMO in the utility
vehicle segment; the product went on to be a big success and became the
leader in the segment.
Around the same time the Indica was introduced the company also
introduced the TATA Safari, a SUV which enjoys enormous prestige in the
market today.
The most recent product of the company was the sedan TATA Indigo which
was based on the Indica platform. This product is a bestseller even after
one year of its presence in the now extremely competitive Indian
automotive industry.
The company has also developed numerous concept cars such as the
TATA Aria and the Marina.
The company today exports the Indica to countries across the world and
the most notable being the agreement with ROVER U.K for 5,00,000 cars
which are today being sold as the City Rover in the U.K.
B) Year of Establishment:
Hyundai Motors
1996
India Ltd.
TATA Motors
1945
Ltd.
C) Financials:
Particulars
TATA Motors
Hyundai
Turnover*
Rs. 1549 Cr
Rs 2310 Cr
The turnover for TATA is only for its passenger car unit.
* Source: India Info line & India Car (URLs).
D) Product Mix
All the above cars are a product of Hyundai Motors and are available in the
market.
Indica
Indigo
Safari
Sumo
All the above cars are a product of TATA motors and are available in the
market.
E) Market Share
TATA
Hyundai
B segment
18%
30%
C segment
17%
15%
3%
F) Area of operation
Company
North
East
West
South
1. TATA motors
2. Hyundai motors
Findings
Factory/Plant
C&FA
C&FA
Dealers
Dealers
Dealers
Dealers
Dealers
Dealers
Factory
/Plant
Dealers
Dealers
Dealers
Dealers
Dealers
TATA motors does not have any C&F agents. The cars are delivered to the
dealers directly by the company owned transportation facility.
Dealers
MD
President
Executive Director
(Marketing &
Sales)
GM
(Sales)
Regional
Manager
Regional
Manager
Regional
Manager
Sales
Manager
Sales
Manager
Sales
Manager
Sales
Executives
(Dealers
(dealers))
Sales
Executives
(Dealers)
Sales
Executives
(Dealers)
Chairman
Chairman
PassengerCar
Car
Passenger
BusinessUnit
Unit
Business
Commercial
Commercial
Vehicle
Vehicle
Division
Division
Engineering
Engineering
Research
Research
centre
centre
Business
Business
Development
Development
VP
VP
GM
GM
Sales(cars)
(cars)
Sales
Regional
Regional
Manager
Manager
South
South
Regional
Regional
Manager
Manager
West
West
DealerAccounts
Accounts
Dealer
Manager
Manager
Dealers
Dealers
Dealers
Dealers
Dealers
Dealers
DGM
DGM
Sales(UV)
(UV)
Sales
Regional
Regional
Manager
Manager
East
East
Regional
Regional
Manager
Manager
North
North
GM
GM
Service
Service
DGM
DGM
Dealerdevelopment
development
Dealer
&
commercial
& commercial
planning
planning
The distribution system for Hyundai Motors can be broadly divided into two
tiers:
Tier 1:
The cars are shipped from the factory to the dealer direct by the C&FA.
There is no warehousing at this level.
Tier 2:
The cars are transported through train under the RAKE system.
The Hyundai Motors plant is located in Chennai, from where after the
dealer request his order through the order request form. The order is
routed through the regional office to the plant over the companys ERP
system. Once the allotted car is rolled out, it is stored in the car lot which
has designated areas for each area. The C&FA agent takes over from
there and the cars are loaded in trailers and are transported through road.
However there are two different ways a car is shipped to its required
destination:
1. Conventional Method:
The cars are handed over to the C&FA who transports all the cars to the
required destinations. Different C&F agents are contracted for different
regions. The C&FA move all the cars from the factory to the dealers by
trailers.
2. RAKE Movement:
This system is used for the Key regions, namely Delhi and Mumbai. The
Company has constructed a railway terminal within its factory premises
where all the cars required for these markets are loaded onto a separate
train made possible by a contract with Indian Railways. The C&FA for the
market will have his own terminal at the destination where the cars are
unloaded and dispatched to the dealers by trucks.
The logic behind this system is that for these key markets, the volume of
cars required are more than other markets, hence if the cars are to be sent
by truck, it will lead to a shortage of trucks for the other markets. Also the
cost is more viable through such means for such large volumes over long
distances. The company pays for all the transportation costs of the cars.
Within this network the only channel partners are dealers and C&F agents.
The C&F agents are selected by the company on the basis of their
capacity and ability in transporting the cars and the cost they quote for
their services.
The dealers on the other hand are selected by the company on the basis
of their ability and willingness to invest, their ability to promote sales and
the availability of an appropriate location for the showroom and service
centre on their part.
The company maintains a sincerity deposit of Rs 2.5 lakhs per dealer. This
is to hedge the companys risks over payment of servicing dues one dealer
owes to another. The other commitment the company expects from the
dealer is setting up of a fully fledged service centre and showroom with
competent personnel.
Since the company does not allow credit on any basis to any dealer for the
stock, the dealers are expected to pay for all cars they order for from the
company and every dealer is expected to maintain a stock of two to three
weeks at any given time of both cars and spares. The required stock is
determined on the basis of the territory the dealer represents. For
example:
All orders are made on an order form which is collected by the companys
appointed courier agency and the payments are made by the dealers
banks to the companys bank ABN AMRO, Chennai through clearing
facilities arranged by the company. This is done in order to remove the
delay in time.
The dealers get a return of 3% to 4% per car depending on the model and
variant sold. The return the dealers get on servicing depends on the
amount payable for servicing where the dealer levies a service charge. The
dealers main profits are made on the spare parts they sell.
Sales Targets
The company normally issues targets to all the dealers based on the sales
of the corresponding month of the previous year. The target is also
assigned depending on the regions classified territory.
Order Processing:
Since the plant starts production of a particular car only when a confirmed
order is placed, time is an important element.
The company has an ERP system between all the regional offices and the
plant and the dealer for making the order form and confirming the order will
first have to make the payments for all the cars ordered and then the
regional office will make the necessary transaction over the ERP upon
confirmation of payment from their bank.
Service Network:
All the dealers of the company are equipped with a fully fledged service
centre; however the company also has a number of authorized service
centers in other places, which are operated by the dealers themselves or
by other parties who may not be a dealer.
All spare parts are stored in a warehouse which is operated by the regional
office and all these spare parts are sent from the factory to the service
centers through these warehouses.
At the time of sale the dealer is entitled to Rs 2500 per car as servicing
charges, however if a car sold by one dealer is serviced by another then
For Example:
X Hyundai in Delhi sold a Santro to Mr. Shingla who later serviced his car
in Y Hyundai in Kanpur; the servicing charge which X Hyundai had taken
from the customer would be reimbursed to Y Hyundai through the regional
office.
This amount though small, adds up to a lot, for example if a dealer sells
100 cars a month, then he is entitled to Rs 2, 50,000 on this account only.
Hyundai motors also has a 24hours help line number. This facility is
available only in big town at the moment and very less on the highways.
The distribution network for TATA motors is very simple. There is no C&F
agent involved. After the production of the car the cars are directly
transported to the dealers in the different regions. The transport is done
through TATA itself.
TATA has its manufacturing units in Jamshedpur, Pune and Lucknow. After
the dealer has placed his order to the company through a request form the
cars are allotted to them and loaded in the trailers to be sent off the
dealers.
2. By Train
It is very rare that the cars are transported through the trains, if so then
C&F agents are hired for the job. This transportation is done very rarely
and mainly for key regions like Delhi & Mumbai.
This transportation is usually done when there is a high demand in the
market and the transportation by trailers is not able to meet the high
demand of the market.
The dealers are chosen by the company on the basis of their capacity to
invest, experience, existing line of business and most important of all their
reputation in the market. The dealers location also is a major factor for
their selection for a TATA dealership.
There is a major misconception that TATA asks for a security deposits from
its dealers. TATA motors do not ask for any security deposit from its
dealers instead they ask them to take a Working Loan from HDFC bank.
This loan amount can vary from dealer to dealer depending on their
location. For a small town like Dehra Dun this loan amount is about 2.5 cr.
The main purpose of this loan is that the dealers can make the payment of
the cars that they take from the company, as the company policy does not
have any credit policy. There is also a benefit in taking this loan. If a dealer
takes this loan then he is charged interest as low as 8% whereas if he
The dealers are expected to keep a stock of two to three weeks at any
given point of time for both spares and cars. The stock is determined on
the basis of the segment a dealer falls into. For example
Category
A upto 1500 cars per annum *
B upto 1200 cars per annum
C upto 900 cars per annum
D upto 600 cars per annum#
The dealers get a return of 3% on every car they sell depending upon the
variant sold. These days the company offers the dealers various
promotional schemes for example.
If a dealer sells five petrol Indicas he can win a trip to Bangkok. They also
get sales incentives like on selling a petrol Indica car the dealer gets Rs
1000/-
per
car
and
even
more
on
selling
petrol
Safari.
The return the dealers get on servicing depends on the amount payable
for servicing where the dealer levies a service charge. Most of the dealers
profits are made on selling the spare parts.
Sales Targets
The dealers are normally assigned targets based on their area of operation
and their sales based on the corresponding month of the previous month.
The sales targets are not only assigned keeping in mind the region but
also the festive season and not to forget the financial year. During the
festival season the company assigns little higher targets because this time
of the year is considered very auspicious and people buy cars in this
season. Similarly during Shraad the company assigns low targets to the
dealers as the people dont buy cars or any form of metal during this time.
In the month of March the company expects the dealers to sell high
volumes because all the allocation of the budget is done in this month and
the company whishes to capitalize on it.
Due to TATAS export obligation the target is not based on the full
production capacity of the factories.
Service Network
All the dealers are equipped with a fully fledged service center: however
the company has about 450+ service networks which include 152 dealers
and about 300 TATA service centers and TATA service point. The basic
difference between TATA service center and TATA service point is that a
service center can give a guarantee whereas a service point cannot. The
service point is not that well equipped and can only handle emergency
cases like in a highway.
All the spare parts are sent to the dealers from the factories through C&F
agents. The C&F agents are hired only to deliver the spare parts to the
dealers. No C&F agents are involved in other process.
At the time of sale the dealer is entitled to some amount per car as
servicing charges, however if a car sold by one dealer is serviced by
another then the latter is entitled to reimbursement of the amount. This is
done through a reimbursement slip.
TATA motors also have a 24 hour helpline no. This facility is only available
in big towns like Delhi and Mumbai. It is also available in small towns also
but only in a limited area
TATA motors takes good care of its customers by getting a White form a
customer satisfaction form and a sales satisfaction form filled by its
customers. This insures the customer they havent made a mistake by
selecting the car.
We questioned two dealers each from Hyundai and from TATA. We found little
difference in the distribution system of the two companies.
There are about 134 dealers all over India for Hyundai and about 152
dealers for TATA all over India.
Hyundai has 122 service centres all over India and TATA has about 300
service centres and service points.
Dealers
This graph represents the sales of Hyundai Accent and TATA Indigo
respectively. As seen in the graph the TATA has a better sale for its Sedan
as compared to that of Hyundai.
On comparing both the companies it was found out that Hyundai sells
more B segment cars than TATA. But TATA sells more of its Indigos as
compared to the Hyundai Accent.
This graph represents how much margin a dealer gets in selling a car.
As seen in the graph a Hyundai dealer makes about 3% to 4% per car they
sell whereas a TATA dealer gets about 3%.
There are various other incentives schemes for both the dealers on
achieving the sales targets.
There is no significance difference in the
What kind of a Warranty does the company give for the car?
TATA gives a one and a half year warranty to the customer for the car they
sell. Additional one and a half year warranty is also available for additional
Rs 2700.
Hyundai gives a year warranty on each car it sells. There is no additional
warranty available.
Each Hyundai showroom has about 20 sales people. There is one GM, 2
area managers, 3 finance executives, 8 sales executives and 6 field
agents. Hyundai also has 1 for telemarketing.
Does the dealer perform any other function other than sales?
It is mandatory for both the dealers to have a fully equipped service centre
for after sales services. It was found out from our survey that
approximately 20% to 30% of the dealers revenues are earned from sales
and rest 80% to 70% are earned through service.
CONCLUSION
From our research we have found out that there are about 152 dealers for
TATA and about 134 dealers for Hyundai. Hyundai has one manufacturing
unit which is based in Chennai whereas TATA has 3 units, but we also
have to keep in mind that TATA also manufactures commercial vehicles like
trucks and busses.
Tata motors benefits from its widespread dealer network. Being an
indigenous company it has a well oiled mechanism for delivering the car to
its end customer. It also has large number of service centers spread
across the breadth and width of company. the company offers sufficient
incentives to motivates its sales force even foreign trips are given as
incentives.
Tata motors should try to reduce its order processing time as customer
may loose interest if it stretches long. There is a waiting of 10 to 12 days
on Indigo; company should take steps to reduce this time.
In spite of being a foreign company, Hyundai has a well maintained
distribution network and because of this it has a bigger market share in the
B segment category but to further increase its strength it can increase its
dealerships in the smaller cities and towns. It has one of the best service
centers facilities in the industry.
RECOMMENDATIONS
5. Usually the dealers buy cars from the company even before
they get orders from the customers and then they are free to
sell to the customers. So in a way there is no direct relation
between the customers and the company but we think that
there has to be some sort of direct relationship between the
two.
Annexure
Discussion guidelines
Distribution
Sales
1. What is the sales structure of your organization?
2. How do you determine the targets for each territory?
3. Who is responsible for assigning targets?
Service
1. How long does it take for a car to get serviced?
2. What is the company system for overseeing the after sales function?
3. How are the service recorded?
4. How are authorised service centers handled?
5. Are there any incentives for service network?
14. How many free services does the company give for a car?
BIBLIOGRAPHY
The entire project is the result of our sincere effort. We have taken
the help of library, referring to different books and how can we
forget the net.
A) IIPM, library
B) British library
2. Books Referred :-