hyundai india

Strategy Formulation

Sec A Group 5 Abhay Sharma 1AAniruddh Srivastava 9ADevansh Doshi 16AManasi Jain 23ASachin Gupta 38AVidooshi Joshi 55A

Agenda

Segment

Strategic Elements

Forces

Trend Analysis

Future Projections

Vision

Strategy

Market share of different types of PV in India

60%17%

11%

12%

Sales

Hatchback

Sedan

SUV

MPV

Market Share by Brand of different Hatchbacks

49%

22%

12%

4%

3%3%

3% 2% 2%

Maruti SuzukiHyundaiTata Motors LtdFordGeneral MotorsHondaVolkswagenToyotaOthers

Monthly sales for Indian hatchback manufacturers 2012- 13

ForcesTrend Analysis

Future Projections

VisionStrategy Formulation

Strategic Elements

Hatchback Segment

•Hyundai entered in 1996 in India and has become 2nd largest car manufacturer and largest passenger car exporter for 7 years in a row•Market share of 14.4% in PV segment, 2nd to MSIL• Currently has Eon, Santro, i10, Grand i10, i20 in

hatchback segment

Segment

1. Indians were unsure about Koreanproducts especially automobiles. First taskwas to develop a positive association withIndian customers

2. Developing a corporate image forHyundai. Since cars are high involvementproduct, customers will make a choicelooking on the maker, service support,spares availability , quality etc. Hence thelaunch of Santro should also launch thecorporate brand Hyundai.

3. The design of Santro. Santro was designedto be a tall boy car and initial product testingrevealed that Indians did not liked the tallboy design. So the unenviable task forHyundai was to make Indian consumers likeSantro.

4. The grip of Maruti on the Indian carmarket. The B segment was dominated byZen which has proved itself to be a reliableworkhorse. Zen was the preferred and logicalupgrade to 800 and the car was consideredto be the most reliable and powerful in thatsegment. To convert the potential Zen usersto Santro was really a nightmare for anymarketer.

Challenges for Hyundaito launch Santro in 1998

The first ad introduced the brand and the company with a subtle statement : We settle only for the best -> Followed by teaser ads which depicted Shah Rukh being convinced to believe that Hyundai is serious about India, the quality issue and the brand Santro. Finally came the launch ad which showed Shah Rukh who represented the Indian consumer saying " I am Convinced" .

Repositioning – Santro variant

Changed design and launched under the name Santro Xing.

Appeal to first time car buyers not as an upgrade for 800.

TG was 25-30 years. Positioned as Sunshine car and roped Priety Zinta as the brand

ambassador.

Positioning

Family Car targeting marutisuzuki 800 users who wanted

to upgrade.

TG was 35-45 years middleclass Indians.

Ugly Car – Tall boy design

Performance, design aspect –turned biggest disadvantage

into advantage

Runaway success within 4 years of its launch displaced

Zen as the second largest selling car in India

Santro – the sunshine story


Future Projections Vision


Strategic Elements

Segment

India’s hatchback segment over the years

Other compact cars like Matiz, Fiat Uno, Palio failed to gain traction in the market and were phased out. Maruti Suzuki 800, Alto, Tata Indica and Hyundai Santro practically owned the hatchback segment until the recent entry of the foreign players.Mini models dominated the market for most of the past decade but now the sales of the compact cars lead the hatchback segment and 12 brands are producing models

Maruti took hold of the hatchback market in 1980s when it introduced the Maruti 800, a customised car aimed at India’s mass market which dislodged Hm’s Ambassador from pole position. For an auto sector where previous decade annual sales were 35,000-40,000 units Maruti was manufacturing and selling 100,000 cars a year.

HMIL in 1998 became the first carmaker to seriously challenge Maruti’s dominance by launching Santro, which was a runaway success and became the segment’s no.1 seller within the year it was launched. Maruti introduced WagonR in response but the car did not enter the market for 2 years due to production cycle issues.

Tata Motors announced India’s first totally homegrown passenger car, the Indica, in 1998. Its rugged look was an instant hit.


Future Projections Vision Strategy

FormulationStrategic Elements

Segment

Market Segmentation

Hatchback

Compact

Mini

Micro

0100,000200,000300,000400,000500,000600,000700,000800,000900,000

2010-11

2011-12

2012-13

Compact

Mini

Micro

Annual Sales by Hatchback sub-segments (number of vehicles)

Micro

• Tata Nano is currently the only micro car(non-electric) in the market, basic model costing less than 200,000 rupees. The model was marked as the world’s cheapest car. Though it initially performed well in India it has been struggling off late

Mini

• This segment includes a mix of classic models such as the Maruti Suzuki Alto and Hyundai’s Santro Xing as well as newer cars like Hyundai Eon. Basic models are priced from 300,000 to 500,000 rupees

Compact

• Tata’s Indica, Maruti Suzuki’s Swift. The basic models are priced at 400,000 – 500,000 rupees



FromulationStrategic Elements

Segment

Sales vs Price positioning of key hatchback models

Source: SIAM

Customers want value for money not just a low priced car




Segment

Specification Comparison

Specification Maruti Suzuki Alto 800 Vxi Hyundai Eon Magna+

Cost INR 3.25 Lakh INR 3.5 Lakh

Displacement (cc) 796 814

Mileage (ARAI) (kmpl) 22.74 21.4

Central Locking Yes Remote

12V Power Outlets - 1

Adjustable Head-rests X Front & Rear

Seat Belt Warning X Present

Door Ajar Warning X Present

Steering Adjustment X Tilt



FormulationStrategic elements

Segment

Specification Maruti Suzuki Wagon R Hyundai i10 Sportz

Cost INR 4.34 Lakh INR 4.36 Lakh

Displacement (cc) 1197 1197

Mileage (ARAI) (kmpl) 20.5 19.81

Anti-Lock Braking System X Present

Central Locking Present Remote

Airbags X 2 (Driver & Co-Driver)

Rain-sensing Wipers X Present

Fog Lamps Front Front & Rear

USB Compatibility X Present

Specification Comparison




Segment

• Only 13 cars per 1000 people

• 60% of the PV market is Hatchback segment

• Consumers are informed and they are value driven

• Huge growth potential for HMIL

CAR DENSITY

•Emerging markets are slowing

• Manufactured cars which suit Indian roads and Indian consumer tastes.

• Disposable income level is at a constant increase -> the number of first time buyers is huge

•Rapid urbanization – increase in Rural demand

•100% FDI in the automotive sector

• Govt. has granted concessions, such as reduced interest rates for export financing. Weighted tax deduction of up to 150% for in-house research and R & D activities

•Several Indian firms have partnered with global players. While some have formed joint ventures with equity participation, other also has entered into technology tie-ups. Establishment of India as a manufacturing hub, for mini, compact cars, OEMs and for auto components.

• Economies of scale achieved by existing players hard to surpass and difficult to discount.

• Existing distribution channels : these channels lend an unparalleled advantage to established players, almost impossible to replicate

• Existing service networks: these networks lend great strengths to established players, impossible to counter

• Preference for small and compact cars. They are socially acceptable even amongst the well off. Preference for fuel efficient cars with low running costs

• More and more emphasis is being laid on R & D activities carried out by companies in India

• Minimum fuel efficiency norms for Passenger Vehicles - 14 % increase in mileage by 2016-17 - CAFC

SOCIETAL FACTORS

• Large and growing domestic auto market

• Competition is huge in this segment – 12 brands are competing against each other in the hatchback segment

• HMIL has market share of 48% of the total exports of PV from India

TASK ENVIRONMENT

EXTERNAL ENVIRONMENTAL FACTORS

Trend Analysis


FormulationSegment Forces

Strategic elements

• Hyundai is known for its innovation

• To give good quality used cars to Indian Customers. Vehicles are certified by Hyundai Engineers using 147 check points

• Creating brand image among consumers through aggressive investment in advertisement and sponsorships

• Hyundai products are not as cost effective since it doesn’t compromise on its quality

• Human centric, eco-friendly technologies and services

INNOVATION

• Will have to increase its rural reach

• High brand equity - Korean manufacture has become an Indian brand due to its long time presence in the Indian market

• Perceived as value for money vehicle which does not compromise on its quality

• India is a cricket crazy nation so tie ups with ICC the best possible marketing strategy

BRAND POSITIONING

• Management philosophy - . Realization of Possibilities, Unlimited sense of Responsibility , Respect for Mankind

• Core Values – Customer, Challenge, Collaboration, People, Globality

• Frequent change in management not good for the organization

• Car sales dropped in July 2012 when the sales and marketing head resigned

COMPANY CULTURE & VALUES

INTERNAL ENVIRONMENTAL FACTORS




Segment Segment

OPPORTUNITIES THREATS

Car Density• Tremendous growth opportunity for Hyundai in hatchback

segment

Societal Factors• Disposable income level is at a constant increase -> the

number of first time buyers is huge• 100% FDI in the automotive sector Government

concessions

Task Environment• Large and growing domestic auto market

Innovation• Human centric, eco-friendly technologies and services• Govt. has granted concessions, such as reduced interest

rates for export financing. Weighted tax deduction of up to 150% for in-house research and R & D activities

Brand Positioning• Perceived as value for money vehicle which does not

compromise on its quality• High brand equity - Korean manufacture has become an

Indian brand due to its long time presence in the Indian market

Societal Factors• Emerging markets are slowing • Poor service network of Hyundai - Existing service

networks lend great strengths to established players, impossible to counter

• Preference for fuel efficient cars with low running costs

Task Environment• Competition is huge in this segment – 12 brands are

competing against each other in the hatchback segment

Brand Positioning• Will have to increase its rural reach

Company Culture & Values• Frequent change in management not good for the

organization




Segment

Per Capita GDP

Borrowing Rate

AutomotiveIndustry on agrowth phase

Positive correlationwith GDP growth

PV density really low forIndia. Huge scope forhatchbacks.




Segment

• Car sales in India fell for the first time in a decade - down 6.69 per cent in 2012-13 -as the automobile industry struggled to cope with demand slump due to a sluggisheconomy

• The decline in passenger car sales last fiscal was also the steepest in the past 12years when the segment declined by 7.73 per cent in 2000-01.

• Interestingly, total passenger vehicle sales grew 2.15% to 2.69 million units, withpeople buying more sport utility vehicles (SUVs) in 2012-13

• Total sales of vehicles across categories registered a fall of 7.76 per cent to 14,86,522units in March 2013, as against 16,11,525 units in the same month of 2012

Reasons:• High interest rates, which ranged around 11-15 per cent • High fuel prices, mainly that of petrol, also impacted car sales• Industrial output also fell in India by over 1%• Stalled infra projects and slow mining

ForcesTrendAnalysis



Segment

Growth in household income vs car sales Indexed Growth of disposable income, inflation and car sales

Demand Drivers of

Automobile Segment

Availability of wider range of

products

Gradual shift to higher segment

vehicles

Increase in income levels

and purchasing power

Availability of low cost finance

Decrease in vehicle

changeover times Rapid

urbanization and emergence of

tier 2 cities/ non metros

Replacement of aging four wheelers

Growing Concept of second vehicle

in Urban areas




Segment

No longer seen as just basic means of affordable transport

Hatchback is expected to drive the market with higher-end

models competing directly with entry level sedans

Mini and micro hatchbacks expected to penetrate secondary

and tertiary markets; directly competing motorbike and

scooter segment

Expected auto industry revenue at end of FY2017: $127bn with CAGR forecast: 8%for 2013-20

The Passenger Vehicle market of India will even cross Japan by

selling about 5 million Vehicles by 2017-18

The Indian auto exports will be up to $5.62 billion in the year ending

March 2011 and the same will grow to $17.64 billion in 2015-16

1350000 1400000 1450000 1500000 1550000 1600000 1650000

2010-11

2011-12

2012-13

Annual Hatchback Sales




Segment

Automotive Mission Plan 2016

Tax holiday for Automobile Industry for investmentexceeding INR 500 crore

One-stop clearance for FDI proposals in automotivesector

Deduction of 30% of net (total) income for 10 yearsfor new industrial undertaking

State Government to be urged to offer Preferentialallotment of land to automotive plants, Continuousuninterrupted power supply and promote CaptiveGeneration

Key Projects with Strategic Importance for India

• NHDP Project: Largest Highway Development Project

• NSEW Project: Connecting North, South & East, West lengths of India

• Golden Quadrilateral: Connects 4 metros




Segment

• PPP of India is projected to increase considerably, hence may lead to shift of customers from 2 wheelers to Cars

13.846.7 58.8

109.2

140.7151.2

65.2

4138

0

50

100

150

200

250

300

2000-01 2012-13 2015-16E

Growth in Population categories with Higher incomes

Low Income (<45k per month)

Middle Income (Rs 45k-180kper month)

High Income (> 180k permonth)

70.3 76.789.5

100.9113.3

127

0

20

40

60

80

100

120

140

2012 2013 2014 2015 2016 2017

Automobile Industry Growth

Value (USD bn) Linear (Value (USD bn))




Segment

What it takes to become a Global automotive production hub?

Attractive domestic market & proximity to

other markets

Political and Business Environment

Low production cost and efficient supply chain

Technological capabilities in a particular class of

vehicles

In becoming a auto hub

Rapid Urbanization

0

10

20

30

40

50

1950 1960 1970 1980 1990 2000 2010 2020 2030

Urban percentage of Total Population

0

500

1000

1500

2000

2500

2010 2011 2012 2013 2014 2015

Per Capita GDP

Per Capita GDP (USD)

Indian Car Buyers Getting Younger

39 36 33

00

20

40

60

2000 2005 2010 2015




Segment

Future Projections: Segment wise Vehicle Production in India Change in Consumption Pattern




Segment

Lifetime Partner in Automobiles and Beyond

Car has become a life space that occupies a central role in people’s lives

Hyundai seeks to become a lifetime partner in the everyday lives of customers

To come one step closer to its customers and become their beloved brand.

Hyundai is developing eco-friendly and human-oriented technologies for the future

Taking the customerexperience andsatisfaction to anotherlevel

Penetrate the servicecenters and Distributorsnetwork within tier-II andtier-III cities

Aggressively pitchingpremium and microhatchbacks

Improving the experienceof driving through techheavy customizations




Strategic Elements

Segment

Grand i10(4.29L-6.41L)

Grand i10 will slot into the segment above the existing i10, since Sub-compacts make up nearly 60 percent of the entire Indian car market, makes sense for Hyundai to offer Indian customers two sizes of i10

Specially Designed for Indian Market, with more boot space, Ground Clearance, rear air cond. Priced lower than chief competitor Swift, fuel-efficient, loaded with features (keyless start & go,

cooled glove box) Disadvantage: More suited as a four seater, rather than 5

• Rear defogger, ABS & Airbags only on Asta (top variant). Should have been optional with the middle variant

What can be done??? Automatic transmission should be included because of stop-and-go traffic of metros More focus on Mileage as Indian consumers are mileage driven Lesser price differentiation between i20 and grand i10, hence better positioning and differentiation are required 2nd in sales after Swift; more marketing efforts, service centers and distributors in rural areas is the need of the hour Hyundai service costs needs to bring down as customers now look for maintenance and after sales cost

Forces: Economic Scenario: With improving economy, 5-6 lakh Premium hatchback will

become the choice of 1st car purchase Favourable Customer Preference: buyer today looks to buy a car for the family and subsequently

looks at the quality of the dealership for service Favorable




Strategic Elements

Segment

i20 (4.73L-7.67L) Positives Negatives

Strategy: What needs to be done? Automatic transmission Prices need to bring down to create better differentiation

with compact sedans and low category sedans Overhaul engine and steering related problems as product

recall might be imminent Since 2nd time buyers are most likely the user of Premium

hatchback like i20, hence things like quality of the dealership for service, vehicle reliability and re-sale value should be enhanced.




Strategic Elements

Segment

•The crude oil prices are high and are affecting the decision making Indian automobile customers

•The most important factor Indians weigh now is the fuel economy of the vehicle

•The biggest competitor for HMIL in India is MSIL and the positioning of its products is primarily based on mileage acrosssegments.

•Medium - Long term strategy for HMIL should be R&D and development of more fuel efficient engines, HEVs (Hybrid andelectric cars) and gradually reposition some of their more fuel efficient models to take away the advantage from MSIL

•Existing models of Hyundai in India are not far behind MSIL in terms of mileage

•More fuel efficient vehicles would also attract more customers specially in Tier 2 and 3 cities




Segment

Global Crude Oil price

Entering into micro hatchback segment: Apart fromNano (unsuccessful), no other model exists (Short-term)

Sales are continually dipping for Nano because ofengine problems, wrong positioning (Cheapest).Hyundai can leverage its technology and introducehatchback in this micro segment.




Strategic Elements

Segment

New launches:

Launch in Hybrid (HEVs) car Segment

Launch in Micro Hatchback Segment

Toyota (Prius) and M&M have tried their luck in thesegment of hybrid cars, with no success, as very highcosts are involved in the production (High upfrontcost, cost of energy storage despite on-going fuelsavings)

Develop in house R&D and develop Hybrid asannoying sky rocketing prices of fuel and can getGovts help (National Electric Mobility Mission Plan2020). (Long term Strategy)

•Working women specially in urban India have high disposable incomes and also enjoy decision making freedom

•Seeing the success of Hero Pleasure and TVS Scooty Pep, Hyundai can enter with a new product especially designed for women

•The positioning would be unique in India specially inclined towards women

•Blue ocean strategy to enter this lucrative segment, but Hyundai must develop a car specially designed for women in India

•Such experiments have been dome in the more mature economies of the west and Japan and have paid good dividends

•The attraction is not only in the color of the cars but also safety feature and comfort the car provides to the driver

•Competitors Honda, Nissan already have products in the category which they can launch in India when the market is ripe

•Product Kia Spectra already in other markets(Kia is under Hyundai Motor Corporation)

•Primary positioning is that it empowers women




Segment

Women’s Car 19.7 22.3 25.7 27.5

0

50

1981 1991 2001 2011

Work Participation rate of Women

hyundai india

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