Ramnarain Ruia Autonomous College, Matunga, Mumbai 400019

Class TYBA Sem V Commerce Assignment

Div : C ( RUACOM501 ) 2020-21

Commerce Assignment for the year 2020-21

Class TYBA
Paper Code RUACOM501
Paper Title Introduction to Management
Topic of Assignment A company analysis of BMW
Name Mrunmayee Mirlekar
Roll No. 3812
Division C

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 EXECUTIVE SUMMARY
The luxury car market in India has registered a fair amount of growth in the last few years
and is growing at the rate of 25% per year. A luxury car is a luxuriously styled
automobile which is designed to give satisfaction and comfort to its owner. A
luxury car typically has carrying capacity of 6 passengers. The luxury cars in the Indian
market are very expensive, with price tags that start from Rs. 20 lakh. Hence,
luxury cars can only be afforded by the people who belong to the high income group and
there are a lot of such takers in the Indian automobile market. Almost every sector is eying
India as a potential investing hub, and automobile sector is no exception. Besides being still a
developing country, it shouldn’t be a surprising fact that Indian ranks world number 3 in
terms of the number of millionaires.

This era of development in India has been at its best,

despite recession, strong fundamentals of Indian economy have managed to post a decent
GDP growth last year.
Increase in disposable income of the people has led to a different lifestyle. Now, the mindset
of Indian consumer is a lot different. Previously, Indian consumers used to check the prices
of everything they bought. Now, the consumer looks at the experience of the company during
the buying process. More than price, Quality matters. This paradigm shift has also changed
the way companies look at India. Slowly and steadily the luxury car market which was in a
very nascent condition in India, is now counting on big revenues from the country’s
customers.

Of late, there had been a steep increase in the luxury car market. Year 2009 recorded a
whopping 25% growth in the luxury car market. It would be news for many of us that India
ranks number 1 in exporting automobile components. The German machines which have
fame all over the world use components which are imported from India.
New entrants like Volkswagen are going to heat up the competition even more. Currently the
fight is in between BMW and Merc. Despite being a late entrant in the Market, BMW has
been successful in capturing a considerable amount of market share. But, this fight between
just two companies is not going to stay for long as new players are entering the Indian
market. Luxury sedans are available from the price range of Rs. 20 lakhs – 30 lakhs which
are mostly preferred by the first time buyers in this segment. The achievers, who adapt to the
latest happening and like to be dominant, are always quick in buying the heavy priced sedans.

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CHAPTER 1: INTRODUCTION
Growth of the luxury automobile sector

India, the world's second-fastest growing auto market, is in top-gear growth.

The country is a hot destination for automobile manufacturers due to its robust
economic growth, favourable demographics, higher disposable income,
changing lifestyle and positive industrial ecosystem. India is expected to
become the third biggest automaker in the world within next decade.

The various reasons for the growth of luxury cars in India are:

 The economy is rising in the country which has given the people more
disposable income which they are spending in buying luxury cars.
 Various loan schemes have been launched by the automobile
manufacturers and the financial institutions. This has made it very easy
for the people to buy luxury cars and this has boosted the luxury car
market in India.
 With the IT boom in the country many youngsters are earning high pay
packages which enable them to buy luxury cars. And this have further
given boost to the market of luxury car in India.
 The government have formulated many policies such as the relaxation of
equity regulations and the reduction of import tariffs pertaining to the
automobile industry.
 These have helped to reduce the prices of the luxury cars, which in turn
have led to the growth of the luxury car market in India.

The various automobile companies manufacturing luxury cars for India are:

 BMW manufacturers the BMW 530i and BMW 760li models

 Rolls Royce manufactures the Rolls Royce Phantom V 12 model
 Porsche manufactures the 911 Carrera, 911 Carrera S, and Cayman
models
 Daimler Chrysler manufactures the Mercedes Benz C and E class models
 Bentley manufactures the Bentley Range and Bentley Continental models

Luxury car market in India has grown over the last few years. That it continues
to grow more efforts must be made by the Indian automobile industry and the
government of India. And only then the luxury car market in India will be able
to reach its heights.

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Objectives of study

The research objective is a statement, in a precise terminology as possible of

what information is needed. The research objectives should be framed so that
obtaining the information will ensure that the research purpose is satisfied. In
India, the sky is bright for the luxury car makers. The Indian consumers’
inclination for owning a luxury car shots up the demand for such cars for the
past few months. Many car companies are now introducing cars in the luxury
car segment to attract new customers.

The various objectives of the studies are as follows:

 To determine the scope of luxury cars in India.

 Growth opportunities of luxury cars in India.
 To identify and analyse the factors influencing the purchase of cars
 To determine the demographic variables of the customers of different
brands of cars

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CHAPTER 2: THE THREE COMPETING LUXURY
CAR BRANDS IN INDIA
Major luxury cars in India- Mercedes-Benz, BMW and Audi put together have
around 85%market share. The German car brand Mercedes-Benz had first
mover advantage as it had started operations in India in 1995 and there was no
direct competition in this category. So, it remained ‘Nume r o Un o ’ luxury car
brand in India for more than a decade . But , market dynamics have changed
significantly after the entry of BMW in 2006 followed by Audi in2007.The
overall market share of luxury cars has been reorganized due to the new
entrants. This has resulted in new equations being forged amongst the various
players, driven primarily by a rapidly swelling millionaire-club having
diversified choices and preferences. In 2006, BMW had 9% market share which
has now grown to 42%, catapulting BMW as the number one luxury brand in
terms of sales. Audi which started its operations in 2007 has had the fastest
growth rate amongst the three and has now captured 20% of the luxury car
market. So, the Indian luxury car market is favourable for the entrants who are
capable of grabbing the untapped opportunities by following the customer-
oriented approach and having ability to induce demand by innovation at each
level of marketing mix. To get a deeper understanding of the scenario we need
to develop into the competitive strategies of these three brands.

BMW and Mercedes-Benz

Mercedes-Benz India Limited was established in November 1994 as a join

venture between Daimler-Benz AG and erstwhile Telco (presently, Tata
Motors). It has traversed a long journey s t a r t in g with the launch of one of
the most successful models worldwide – the Mercedes-Benz E Class (W124) in
March 1995.Mercedes India, now known as DaimlerChrysler India Private Ltd.,
has a state-of-the artfully- equipped manufacturing unit in Pune. Mercedes-Benz
is known for providing the Indian customers, latest models and technology
following strict quality standards. The company considers India as one of its
most promising markets. The Mercedes- Benz C Class and Mercedes-Benz E
Class cars are locally manufactured while the Mercedes-Benz SL-Class cars are
imported as completely built units (CBUs). The company offers S-Class, E-
Class, C-Class, M Class, CLS-Class, SLK-Class, CL-Class and the Maybach.

European Major BMW entered in India in 2006. The company with

headquarters in Gurgaon and production unit in Chennai had initial investment
of 1.1 billion rupees. It has swiftly developed both infrastructure and dealership
network. The production plant at Chennai, established in 2007, has an annual
capacity of 3000 units in a single shift and it produces BMW 3 series and BMW

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5 series sedans. The rest of models- BMW 7 series, X3 and X5 are imported as
CBUs. BMW 3 and 5 series account for 80% of the total sales of company in
India, of which BMW 5 series has highest sales. BMW India, with its
aggressive marketing, fast expansion of product profiles, strategic dealership
location selection and supplementary financial service offering, has managed to
wrest biggest market share from Mercedes-Benz. BMW and Audi, both focus
on sportier features and new launches to encourage young buyers.

Decrease in the average age of luxury car buyers is a favourable condition for
this kind of selling strategy. In the Indian scenario, where 75% of passenger
cars and 60% of luxury cars are purchased through financing, financial
supplementary support is critical to success of the car makers. Taking this into
account, BMW Group is planning to introduce BMW Financial Services India,
which will provide services to BMW customers, providing financing facilities
to fleet-owners and commercial-financing to their dealers. Discounting older
models is another successful strategy applied by the company.

It is also planning to launch ‘Pre-Owned Car Sales Program’ in 2010. BMW’s

5- year coverage (after sales) is another attractive factor compared to the 2-year
warranty provided by Mercedes-Benz. In the Indian scenario, the luxury cars
are generally chauffeur-driven. This trend has been well-imbibed by BMW as it
has focused more on back-seat facilities during designing and marketing. The
company has been focusing on other technologies like Integral Active
Steering , Pa r k Distance Control (PDC) and Head-up Display (X5) for
providing enhanced features for comfort in the Indian driving conditions. BMW
has been acting very swiftly in identifying its dealership locations so as to
achieve maximum sales volume aligned. BMW with 15 dealership locations
(two locations in Delhi and Mumbai) competes with Mercedes-Benz having 32
dealership locations because it has strategically expanded its dealership network
to higher demand luxury car markets. In next phase BMW is planning to target
emerging tier 1 and 2 cities like Jaipur and Lucknow to compete with Mercedes
whose 25-30% sales revenue comes from tier 2 cities.

BMW's largest market is in Europe, with China as the second largest and the US
as the third (judged by sales volume). The most popular car models is the 3
Series followed by the 5 series, which together stood for 37% of the total
automotive sales volume in 2016 (BMW has 14 different series/base models).

To get a better understanding about whether BMW's margins and profitability is

good or bad, the company should be compared to other companies in the same
sector. In this analysis, I did a rough screening of BMW and 10 of its
competitors with estimated values for 2017 and forecasted values for 2018.

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Latest and Fastest- Audi AG

Audi India started operating in 2007 by establishing its own sales company in
Mumbai. The company started production of Audi A4 in November 2007,
followed by Audi A6 in 2008 in its Aurangabad plant. Rest of the models - Audi
A8, Audi Q5 and Q7, Audi TT and super speed racing car Au di R8 are
imported as CBUs . Audi significantly invested in brand building, marketing the
product qualities and improving after sales services in India. Audi offers
technology with composure and agility to current techno affluent Indian youth.
Known for its technology, luxury and style, this German car maker has received
five different awards by Indian auto media. Audi’s commitment to innovative
and sophisticated design is widely endorsed by car buyers. One of the reasons of
Audi’s global success is its ability to identify potential markets for expansion.
The company selected India as its second production site after China.

The local production provides Audi, ability to cater customer needs in a cost
effective manner. Audi is always a first choice of techno-geeks who want to get
more involved during the drive. Besides being the fastest growing luxury brand
in India, Audi regularly brings new models and variants of existing models to
surprise the car lovers. Audi Q5 is the most endorsed imported sports utility
vehicle (SUV) in India. The company followed the same dealership location
strategy as BMW by selecting similar sales regions of high demand (four
dealership locations in northern and central regions Delhi, Gurgaon, Chandigarh
and Ludhiana) at 13 locations country-wide. Due to these efforts, Audi has
rapidly captured market in India and has exerted considerable pressure on the
other dominant players. The company noticed a 65% jump in sales (200 cars) in
May 2010 compared to May2009 (121 cars). Both Audi and BMW have
focused in the world class music system facility and ultra luxury looks in their
models. Luxury car segment is going to change as there are many new cars
lined-up for launch during the period 2010-2012 with approximately 50 to 60
new models from major global brands. The market futures will not only be
driven by product itself but also services associated with it. So it would be a war
of biggies, competing on diverse parameters. Automobile market will be
noticing a great shift but as the previous pattern of market shows, the only
mantra of success will be a holistic approach aligned to the company’s brand
image and customer oriented vision.

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CHAPTER 3: HISTORY OF THE 3 LUXURY CAR
BRANDS (BMW, MERCEDES BENZ, AND AUDI)

1) BMW ( Bayerische Motoren Werke)

Although BMWs current fame and reputation as one of the greatest automobile
manufacturers can be mostly linked to models produced in the last two decades,
the history of the marquee stretches back almost 90 years and contains
numerous achievements that have established it as a benchmark. BMW stands
for Bayerische Motoren Werke or Bavarian Motor Company. The company was
established in 1913 and based in Munich, Germany . It started out as an aero
engine manufacturing company, hence the company logo. The logo comprised
of four quadrants of alternating white and blue colour. It is a styled
representation of an airplane propeller spinning against the clear blue sky. The
logo represents a white propeller blade against a blue sky. It reflects the origins
of BMW as a maker of military aircraft engines during WWI. Also, white and
blue are the traditional colours of Bavaria.

2) MERCEDES-BENZ

Th e Mercedes Benz logo is one of the most famous brands in the world. The
Benz logo is a simplistic three-pointed star that represents it’s domination of the
sea, the air, the land. The famous three - pointed star was designed by Gottlieb

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Daimler to show the ability of his motors for land, air and sea-usage. It was first
seen on a Daimler in1909, and was combined with the Benz laurel wreath in
1926 to signify the union of the two firms. Mercedes- Benz is the world’s oldest
automobile manufacturer. The company’s founders, Gottlieb Daimler and Carl
Benz, continued to make automotive history following their invention of the
automobile in 1886. As an automotive pioneer, Daimler and its employees are
committed to excellence and act responsibly towards society and the
environment, to shape the future of safe and sustainable mobility with Ground
breaking technologies and high-quality products.

3) AUDI

The Audi badge the 'Four Rings' is the emblem of one of the oldest car
manufacturers in Germany. It symbolises the 1932 merger of the four
independent motor-vehicle manufacturers: Audi, DKW, Horch and Wanderer.
Together with the NSU brand, which joined in 1969, these companies are the
roots of the present-day AUDI AG. After the war the Audi name - which is
Latin for "Hear!" - disappeared, but was revived in 1965, using the four rings as
a logo. Also, the name is sort of a pun on 'hoerch', German for 'hear', name of
one of the founders. The company itself is more than a century old. The four
rings in the logo have nothing to do with the Olympic rings.

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CHAPTER 4: LUXURY CAR SEGMENT
Luxury vehicle is a marketing term for a vehicle that provides luxury- pleasant
and decent desirable features beyond strict necessity at increased expense. The
term suggest a vehicle with greater equipment, performance , construction
precision, comfort, design ingenuity technological innovation or features that
convey brand image, cachet, status, or prestige or any other feature or
combination of features. Automobile manufacturers market specific makes and
models that are targeted at particular socio-economic classes, and thus "social
status came to be associated more with a particular vehicle than ownership of a
car per se”. Therefore, automakers differentiate among their product lines in
“collusion” with the car buying public.

While a high price is the most frequent factor, it is "styling, engineering, and
even public opinion which cars had the highest and lowest status associated
with them. "Every era in automobile history has had "a group of car marquees
and models that have been expensive to purchase, due to their alleged
superiority of their design and engineering”. Aimed at wealth buyers, such
automobiles might be generically being termed luxury cars.

Though widely used , the term luxury is broad and highly variable . It is a
perpetual, conditional and subjective attribute and may be understood
differently by different people: "What is a luxury car to some... may be
'ordinary' to others."

CHARACTERISTICS

Luxury cars tend to offer a higher degree of comfort than their mainstream
counterpart.
The various characteristics of luxury cars are :

 The important characteristic include genuine leather upholstery and

polished wood grain looked dashboards.
 The luxury cars now a day have traditionally emphasized more on
comfort and safety.
 Luxury vehicles are also a status symbol for consumption.
Contemporary luxury cars also offer higher performance and better
handling, which is often known as sort.
 New safety technologies and comfort amenities, such as anti - lock
brakes , electronic stability control and DVD entertainment systems,
before they trick down to mass market cars. Numerous " smart car "
features are largely only found on luxury cars as of 2009.

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European marquees like Mercedes BMW, and Jaguar have almost never
adopted front-wheel drive and retained a line-up mostly or entirely made up.

CHAPTER 5: LUXURY CARS IN INDIA

1) BMW

BMW , India was set up as a sales subsidiary in Gurgaon in 2006 to spearhead

the formation of its dealer network, and followed it closely by setting up a state-
of-the-art assembly plant in Chennai in January 2007.BMW AG, or Bayerische
Motoren Werke AG, was initially a German aircraft engine manufacturing
company. In 1919, they turned to land vehicle engines, and in 1927 built their
first BMW car christened BMW 3/15. For the greater part of the past century.
BMW Car hassled the world in creating cars for the rich. Exceptional design
concept and elegance has always been a part of the BMW cars. BMW Cars in
India put innovation, intelligence and technology to ensure the safety and
driving comfort of its proud owners. BMW India competes with its rivals by
exhibiting powerfully performing vehicles and having a slight edge over the
others.

The smallest of the BMWs in India, the 3 Series is a highly competent entry-
level luxury sedan. As is the case with all cars from the Bavarian marquee the 3
Series is a car that packs in superb performance with high-end features. With
uniquely BMW design, the 3 Series comes with four engine options - the inline
4 320i, inline 6 325i, the inline 6 330i and the inline 4 320d. Equipped with
iDrive multimedia technology, perfect handling-steering precision and power-
packed performance, the 3 Series is to be experienced to be believed. The 3
series in an exquisite sports sedan available both in petrol and diesel. It falls in
the luxury segment. The exterior exudes confidence and a powerful flow of
expression. The individual exterior details display elegance that reveals
themselves subtly to the eyes. The 3 series with its petrol and diesel variants
targets the upper middle class and the rich Indian consumer with BMW cars
having a price range between rupees twenty five and thirty lakhs.
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Prices of BMW 3 series

BMW 3 Series Car Price List

Variants Price Range

BMW 3 series 320d corporate Rs 24,40,000
edition
BMW 3 series 320i Rs 27,80,000
BMW 3 series 330i Rs 33,95,000
BMW 3 series 320d highline Rs 31,50,000
BMW 3 series 328i Rs 32,00,000

2) MERCEDES-BENZ

Mercedes Benz cars came to India officially in 1994 in collaboration with

Telco .Traditionally, Mercedes Benz cars have consistently catered to wealthy,
rich, and super-rich consumers. The manufacturer's name keeps on changing,
but Mercedes-Benz cars remain Mercedes-Benz, for the Mercedes-Benz name
has a greater brand relationship with world consumers than their manufacturer’s
current corporate name - Daimler-Benz, Daimler-Chrysler, or Daimler AG.
Popular Mercedes Benz sedan car prices range between around rupees twenty-
nine lakhs to Mercedes-Benzes at a bit above one crore thirty lakhs rupees.

Mercedes Benz presence in India

Mercedes-Benz has been associated with India for more than 50 years.
Presently, Mercedes- Benz India’s engagement in India covers several domains:
a) Local production of Mercedes-Benz cars
b) Making available imported Mercedes-Benz cars
c) Commercial Vehicle operations
d) Global sourcing of auto components

Social Involvement of Mercedes-Benz

Mercedes-Benz is also involved with social-oriented programs across India like:

a) Biofuel from Jatropha’

b) Road safety project for children
c) Automotive education, etc.
d) Captive automotive technology research and development

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Mercedes-Benz India has been delighting customers with strong brands and a
wide range of products equipped with the latest in automotive technology. The
company has been the pioneer of the luxury car segment in India with its
inception way back in 1995. It is the only luxury car maker in India to have
such a wide range of cars. The different ranges available today are the C-Class,
CL-Class, CLS-Class, E-Class Saloon, E-Class Coupe, E-Class Cabriolet, GL-
Class, M-Class, R-Class, S-Class, SL-Class, SLK-Class, and the Maybach.
The Mercedes-Benz C-Class is an entry level luxury car in the Indian market.
Direct competition to the BMW 3 Series and Audi A4, the C-Class has
remained as the elegant choice amongst the cars. Solid built, classic good looks
and well appointed interiors are synonymous with the brand and this is what
drives customers to this car. Available in a choice of trim levels and petrol and
diesel engine options, the C-Class is a definite way to announce that you have
indeed arrived in life. Adding to this, The C-Class now comes in with a
panoramic sun roof, Attention Assist and a host of other features.

Variants Price Range

C 200 CGI Elegance Rs. 28,30,000
C 200 CGI Avantgarde Rs. 29,53,000
C 200 CGI Elegance Blue Rs. 28,58,000
EFFICIENCY
C 200 CGI Avantgarde Rs. 29,79,970
Blue EFFICIENCY
C 250 CDI Elegance Rs. 32,03,500
C 250 CDI Avantgarde Rs. 32,81,500
C 250 CDI Elegance Rs. 32,03,000
BLueEFFICIENCY
C 250 CDI Avantgarde Rs. 32,30,000

3) AUDI

The 2012 Audi A4 ranks 3 out of 21 Upscale Midsize Cars. This ranking is
based on our analysis of 29 published reviews and test drives of the Audi A4.
With its sharp interior and exterior styling, available all-wheel drive and good
fuel economy, the 2012 Audi A4 is a viable alternative to more costly rivals.
Frequent comparisons are drawn to rivals such as the BMW 3-Series, which test
drivers often consider to be the benchmark for performance within the class.
Many say that the Audi A4 may ultimately suit drivers better in the real world.
“The A4 may be best in class, period,” writes Automobile Magazine. “Purists
and weekend racers will rightfully stand behind the better-balanced BMW 3
series, but for the majority of buyers looking for German driving dynamics,
great design, and good fuel economy, this may be the best bet.

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Pricing of Audi

Variants Prices
Audi A4 1.8 TFSI Rs 29,71,400
New Audi A4 2.0 TDI multi tronic Rs 29,00,000
Audi A4 2.0 TFSI Rs 31,66,400
New Audi A4 3.2 FSI tiptronic Rs 36,00,000
Quattro
Audi A4 3.0 TDI Quattro Rs 37,72,000

CHAPTER 7: CONSUMER BEHAVIOUR TRENDS

In the past, prestige was due to real financial distance. At heart, luxury is about
exclusivity. Today, given the rise in purchasing power, luxury consumption is
no longer reserved for the few. This is a time in history when the affluent
masses are no longer at a financial distance from luxury. But prestige and
exclusivity has to be driven by distance – except this distance is no longer
financial, but intellectual and cultural. A better way to look at the trends that
exist in this market is to segregate them into categories, namely the marketing
mix trends (product, price, place, promotion) and consumer behaviour trends.

Cognition to emotion

The Indian consumer, today, is influenced more by the affective components

than by the cognitive elements. In the case of Mercedes Benz, the company
communicates the strong relationship of the car with status, snob value and
image. In the case of Audi, the company communicates sleek design and so on.
However, it is no longer necessarily true that customers will take the cognitive
route while purchasing a luxury car. Customers may view Mercedes Benz, Audi
and BMW as parity cars (equivalents) based on cognition, and make the final
choice based on the affective route. This is where the trend takes us. The luxury
brands have taken this affective route and try to evoke emotion through style

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and design. A report says that Mercedes Benz sold 3000 cars in India in 2007,
but is expecting a drop in sales this year because Audi and BMW have entered
the Indian market with more stylish cars and the consumers’ feelings towards
these cars are extremely positive.

Splurge for ‘special’

The most important day for an Indian is his/her marriage, a ceremony which has
for long seen people spending for the special day without hesitation. Given that
the day belongs to the bride and the groom, people are increasingly demanding
the most -splurge able item that there can be; a term now synonymous with
luxury cars. That is why; increasingly rental companies are purchasing
Mercedes and its likes - because there is an increasing demand for the same
from the “marriage market”. This trend shall continue with enhanced demand,
as the demand f o r the demand for these cars for ‘special occasions’ will
penetrate the middle income categories in the country.

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