REPOSITIONING OF HYUNDAI SANTRO

Submitted BY

Zaki Hassan 10904

Kamlesh Kumar 10263

Course: Strategic Marketing Management

Submitted To

Prof: DR MAK Chishti

Table of contents:

INTRODUCTION 4

• About Hyundai Motors 4 • Operations in Pakistan 4• Operations of DFML 5

SWOT ANALYSIS 6

• Strengths 6• Weakness 6• Opportunities 7• Threats 7

PEST ANALYSIS 7

• Political Environment 7• Economic Environment 7• Socio-Cultural Environment 8• Technological Environment 8

MARKET SHARE OF DFML 9

HYUNDAI SNATRO 10

COMPETITORS ANALYSIS 11

MARKET SHARE OF SANTRO 12

REASONS FOR FAILURE 12

MARKETING STRATEGY 13

• Objectives 13• Re-Positioning 13

EXISTING TARGET MARKET AND OSITIONING 13

• Positioning 13

• Target Market 14

EXISTING MARKET MIX 14

• Product 14

• Price 14

• Place 15

• Promotion 15

REVISED TARGET MARKET 16

• Revised Product Features 16

• Price 16

• Promotion 17

• Dsitribution 18

RECOMMENDATION 18

Acknowledgement

Dear Reader:

With the blessings of ALLAH the almighty, the report enclosed has reached its stage of final

completion. This report is a result of exhaustive and much enthusiastic work. We extend our

heartiest thanks to our teacher Sir. Prof: DR MAK Chishti, for conducting this course and

making it interesting and knowledgeable, without his efforts and co-operation the report would

not have been possible. We also thank for his confidence and trust he had in us, importance of

which can in no way be under estimated.

We are equally grateful to Iqra University for providing us the opportunities to pursue our

endeavor. We hope readers of this report can complement the depth of the study and efforts put

into it.

Thanking You

Sincerely,

Kamlesh Kumar 10263

Zaki Hassan 10904

LETTER OF TRANSMITTAL

Prof: DR MAK Chishti

Iqra University

Main Campus

Karachi

Dear Prof: DR MAK Chishti

We request you to accept this report on “Re-launching of HYUNDAI SANTRO” that you

assigned to us at the beginning of summer semester 2011.

It has been a privilege to work on this assignment and we have put in our utmost effort to prepare

a comprehensive report on the topic. Should you have any query concerning the report, we shall

be happy to discuss them with you.

Sincerely,

Kamlesh Kumar 10263

Zaki Hassan 10904

Hyundai Motor Company

Hyundai Motor Company is a division of the Hyundai Kia Automotive Group, is the world’s top

five automaker by 2010 in terms of units sold and one of the Big Asian Four (with Toyota,

Honda and Nissan). Headquartered in Seoul, South Korea, Hyundai operates the world’s largest

integrated automobile manufacturing facility in Ulsan, which is capable of producing 1.6 million

units annually. Hyundai has a wide range of vehicles which cater to the needs of all segments of

the society. From the Santro to the supreme luxury sedan Centennial, from the rugged SUV

Terracan to the sports coupe’ Tiburon, Hyundai manufactures and sells high quality vehicles

worldwide.

The Hyundai logo, a slanted, stylized 'H', is said to be symbolic of two people (the company and

customer) shaking hands. Hyundai means "modernity" in Korean. Hyundai Motor Company

serves with more than 75,000 employees in other assembly plants, Hyundai vehicles are sold in

193 countries through some 6,000 dealerships and showrooms worldwide.

Operations in Pakistan

Hyundai Motors started its operation in Pakistani on December 1998 under the flagship of

Dewan Farooque Motors. On December 25, 1998, Dewan Farooque Motors Limited entered into

Technical Licensing Agreement with Hyundai Motor Company of South Korea for assembling

and manufacturing of Hyundai vehicles in Pakistan. The project cost was approximately Rs. 1.8

billion financed on a 58:42 Debt to Equity ratio, with the assembly plant's installed capacity of

20,000 vehicles annually in two shifts.

Mission Statement:

To be the No. 1 automobile company in Pakistan.

To assume leadership role in the technological advancement of the industry and to

achieve the highest level of quantitative indigenization.

To offer high value, economical and qualitative solutions to address the commuting needs

of a diverse range of customers.

To seek long-term and good relations with our suppliers and dealers with fair, honest and

mutually profitable dealings.

To be a totally customer oriented company and to achieve Total Customer Satisfaction.

To create a work environment, which motivates, recognizes and rewards achievements at

all levels of the organization.

To produce environment friendly vehicles.

To be a contributing corporate citizen for the betterment of society, and to exhibit a

socially responsible behavior.

Dewan Farooque Motors Limited acquired franchises of

Hyundai Motor Company

Kia Motors Corporation

Their aim: to bring in Korean technology to the country to produce vehicles of high quality at

reasonable prices, offering the highest value for money.

Dewan Farooque Motors Operations:

Production:

Dewan Farooque Motors Limited signed Technical License Agreements with Hyundai Motor

Company and Kia Motors Corporation in December 1998, as the progressive manufacturer and

distributor of Hyundai and Kia vehicles in Pakistan.

Marketing:

Dewan farooque Motors markets Hyundai Motors in Pakistan. The company markets and

promotes the product as a whole. However regional marketing is done by the authorized

dealerships which are our main focus in this report.

Ditribution:

Dewan farooque Motors has franchised its authorized dealership to private parties all over

Pakistan. The company provides units to these dealerships and provides technical and

maintenance training and support to ensure after sale service values.

SWOT analysis of Dewan Farooque Motors

STRENGTHS

One of its strength is its location is near to Karachi. Most of its vendors are located in

Karachi. DFML get tires from General Motor, which is also located at Port Qasim. So

DFML saves a lot of transportation cost.

DFML has installed latest technology in its plant, which is almost computerized. It is also

strength for DFML.

DFML has set up a paint system, which is considered no 3 in Asia. As installed in 2000

the state of art Quadrant Measuring Machine to maintain its consistence quality checks

and to ensure quality standard..

DFML a wide product range, which Includes 6 vehicles. Which satisfy each and every

segment of market.

DFML, Labor force is also its strength, which is efficient and well trained. It is obvious

from the fact that employee turnover rate is only 3% and absenteeism rate is only 5%.

Easy availability of genuine spare parts and its resale value act as its strength.

WEAKNESSES

DFML has not yet achieved appropriate economies of scale as compared to its

competitors. DFML and Pak Suzuki motors are producing the same no of vehicles per

year) but for DFML incur huge cost. For DFML CKD kits account for 60% of their total

Manufacturing cost, where as for Honda CKD kit account for 70% CKD kits cost for

DFML is on the average about 10% higher than its competitor Pak Suzuki.

DFML has total capacity of 20000 units. But at present they are producing 8000 units,

this shows that they are not fully utilizing their capacity. It means that they are not

amortizing their fixed cost in best way, while major competitor having capacity of 10000,

but at present producing 7000 units.

Their dealership network is weak. Company does not own this dealership network.

DFML has manufacturer-sponsored retailer franchise systems. They license dealers to

sell their cars. So dealers often charge high price DFML.

According to DFML sources, all major decisions are made in Korea by the holding

company, they send instruction about their decisions in Pakistan and this process delays

the policy making at corporate level by the top management.

OPPORTUNITIES

Political stability in Afghanistan will increase demand for commercial vehicles in the

Central Asian States. So this is an opportunity for them to export the commercial vehicles

as well as passenger cars to Central Asian Republics, for the Central Asian republics,

Karachi being their nearest port the opening of trade routes in these countries, will lead to

an inevitable growth in the transport sector.

According to Manager Imports Mr. Farhan Asrar from DFML. There is an opportunity to

expand market of Shehzore in Nepal and Bhutan, if India gives way through its trade root

to Pakistan by an agreement.

According to sources from DFML, if engineering board of Pakistan makes the industry

specific deletion policy this will provide an opportunity for the development of vendor

industry. At present, there are 180 vendors in the vendors industry, if they remain and

increase in vendor industry, this will enforce localization of cars.

THREATS

The government tax policies are threat to DFML. DFML have to pay 6.25%

capital value added tax (cvt). Apart from this, they have to pay 35% important

duty on CKD kits (the main component of cars), that is imported from Korea. That

has increased its costs.

The law and order situation in the country especially in Karachi is threat to

DFML. Which has caused diminishing of companies production and demand in

the country in demand of locally manufactured cars.

The political instability is also a threat to DFML as well as overall automobiles

industry. Due to political instability policies about tax and import duties are

inconsistent.

Suzuki 800cc and 1000cc cars are substitute for DFML car. The reason is that

people are becoming more price conscious and want economical car, which give

low fuel consumption that, is why Suzuki demand in gradually increasing.

DFML imports CKD kits from Korea, when devaluation in the country takes

place, it increases the CKD cost.

PEST Analysi s:

Uncontrollable environment are those external factors which can prohibit us or can create

hurdles between us and our business. It is also called pest analyses which are as:

Political Environment

Pakistan has to face lots of ups and down since its independence. So many governments have been broken

down by military authority and most of the time marsh law applied on Pakistan. In this scenario no

entrepreneur was willing to invest in Pakistan except few. Due to this market environment wasn’t so good

in Pakistan. Anyhow Pakistani government never been trustworthy for any investor..

Economic Environment

Pakistan, an impoverished and underdeveloped country, has suffered from decades of internal political

disputes and external ongoing conflict with India However, IMF approved the government policies,

encourages by different foreign assistance and renewed access to global market since 2001.

By following these policies government succeed to reverse the situation of economy during last five

years.

Socio-Culture Environment

Pakistan has strong culture background and it has been follow in some particular region of Pakistan

strictly. But with the passage of time it is going to change. Thoughts of people, choices, taste and style

has been totally changed. If we talk about the transportation source in Pakistan, People use buses, pickups

etc for journey. They also have their own as well e.g. cycle, bikes etc and lots of people are pedestrian.

But now the people who haven’t any source of transportation they also want something for their

convenience because they wants to save their time as much as they can. People want to use such vehicle

which looks beautiful and also affordable.

Technological Environment

Technological factor also very important and we haven’t control on it. Technology is grooming with the

passage of time. People also want that the product that they have is full of technology. We never control

on technology for example you launched the product last year and your sale volume on that time is very

high but after sometime due to latest invention a lots of substitute exist in market which affect on your

business so you can’t hold on it.

Market Share of DFML

During fiscal year 2010 73597 units were sold of which DFML sold 831 (1%) while its

Competitors Pak Suzuki, Indus Motors and Honda sold 39646 (54%), 25870(35%) and 7250

(10%) respectively.

Share in %

Pak suzuki motorsIndus motorsHonda MotorsDFML

Hyundai Santro:

The Santro was launched in Pakistan in 2000. As of December 2009, Pakistan is the only country

where the first generation Santro is still being sold and the model has received no upgrades.

Hyundai Santro is a car of 1000 cc powered Hyundai Epsilon Engine, with the latest EFI

(Electronic fuel injection) system and 55/5700 PS/rpm horse power.  Given such specifications,

the car should give its driver something to drive home on. Although certain problems still remain

to be readdressed, the car is now of a more solid stamp, and in faith a better drive. Santro is

available in six variants: Prime, Prime Gv, Club, Club GV, Exec and Exec GV with prices

ranging from Rs. 674,000/- to Rs. 907,000/-.

Competitors Analysis:

Suzuki Motors:

Suzuki is the leading name in small commercial vehicles and passenger cars. Suzuki commenced

its operation by assembling small 800 cc cars. Suzuki has been so far a sole leader in 800cc and

1000cc passenger cars. But the emergence of so many competitors in the market will definitely

trigger a very hard time to Pak Suzuki. Suzuki has launched Mehran 800cc, Cultus 1000cc,

Liana sedan with 1.3- or 1.6-litre, Bolan van & Ravi pickup 800cc. Pak Suzuki’s sales during

FY11 posted growth at 6 per cent to 65,340 units compared to 61,782 units during FY10. Pak

Suzuki is the market leader in the 1000cc and lower segment of cars with sales of Suzuki

Mehran, Suzuki Alto and Suzuki Cultus at 24,119 units, 11,932 units and 11,428 units

respectively. Sales figures of Suzuki Liana remained on the descending trend with 470 units.

Indus motor Company

Is a prominent auto industry player; it is a joint venture between a reputable Pakistan based

group named Habib Group and foreign multinational group named Toyota. Indus motors come

on the 2nd rank in the automobile Industry. Indus Motors dominates the high priced cars

segment with its Toyota Corolla model. Indus Motor Company enjoys the competitive

advantages such as easy availability of spare parts at affordable costs, good after sale service and

good resell value.

Honda Atlas

Honda atlas consist of two brands name Civic and City catering the market of 1300CC and

above targeting the middle level of the market.

Others

After the deposition of duties on imported vehicles, different brands of cars have entered the

Pakistani market. Consumers perceive such foreign brands as good quality and that satisfy self-

esteem needs.

Market Share of Santro

According to Pakistan Automotive Manufacturers Association (PAMA) 23696 cars were sold in

the 1000cc segment of which santro sold only 244 (1%) cars in year 2010.While its competitors

(Cultus, Alto) sold 12658 (53.4) and 10794 (45.5%) respectively.

Reasons for Failures

Hyundai Santro has quite a number of problems next to its design and drive. Firstly, it has

considerable height and, from seating aspect, there is some lack of comfort. Secondly, the

dashboard, which is found just below the left hand-front seat, is really hard for the opening and

not convenient at all (Imagine the driver himself getting in need to open it; it would be nothing

less than dangerous while driving!). Also not to forget there’s a foot-rest, placed straight next to

the clutch pedal, which is far too troublesome, as often the foot pushing the pedal comes in

contact with it along the way, resulting in insufficient-pressing that the transmission wouldn’t

take place. The gears are a little hard too, the wheel turning radius a little small (4.6m), and for

Santro Prime and Club, the steering wheel too is much harder. One of the bad aspects of the car,

over the long haul, is the bad after-sale value. Also, there is an obligatory tuning to be performed

at the Hyundai workshop after the first 1000 Kilometers running of the new car. The tuning is

nothing special, only a means of gaining money, so believe most buyers, and is bound to be one

big turn-off for the customers.

Marketing Strategy

OBJECTIVE

• The key marketing objective of the company is to become the segment leader in 1000 cc

market

• Company seeks to encompass those skilled individuals who value time and quality as

essential assets.

• The utmost priority is to form a share of mind and heart among consumers so as to build

a high market share for the company.

• To duly anticipate in maintaining quality benchmark by maintaining the efficiency of

automobile production unit by continuous research and development program, keeping in

view the customers needs and a sound distribution system to attain the max of customer

satisfaction.

• Our intention is to attain an increase in share of the urban population consisting of

Karachi, Lahore, and Islamabad as well as in rural areas of Pakistan in automobile

industry. The duly purpose to attain this target by direct frontal assault on the market and

to re-launch the brand on a higher scale to eliminate the resistance from small

competitors and taking on competition directly.

RE-Positioning

We will re-position itself as a reasonably priced, high quality and a cost effective car in Pakistan

containing some features and attributes. The car itself will be positioned as “Smart Car”.

Existing Target Market And Positioning

Positioning

Santro was positioned itself as a complete family car.

Target Market

Santro was positioned itself as a complete family car. The brand was targeting those 800 users

who wanted to upgrade into the luxurious cars. The target market was the 35-45 yrs middleclass

Pakistan.

Existing Marketing Mix

Product

There are three essential Hyundai Santro’s models available in showrooms. The Santro Prime,

The Santro Club and The Santro Executive. Santro Prime is the most simplest version of the

three, The Santro Club a happy medium, with the change being matching seat-covers, while The

Santro Executive has power steering and power windows (front only).

Product Features

1000 cc powered Hyundai Epsilon Engine.

4-cylinders, EFI (Efficient Fuel Ignition) engine

55/5700 PS/rpm horse power

5-Speed manual transmission

Nice, stylish and elegant interior. Dash board is equipped with a digital clock, MP3/ CD

player with AM/FM radio and 4 speakers.

Price

Focused on differentiated pricing strategy. For all three models, there are further two categories,

one with CNG and one with not. The price range of all are given below:

Santro Prime

674,000

Santro Prime GV

714,000

Santro Club

787,000

Santro Club GV CNG

827,000

Santro Executive

852,000

Santro Executive GV CNG

907,000

Place

Santro is distributed through the wide distribution network of DFML. It is available through 20

3S dealerships. Authorized 3s dealer provide three types of services all over the Pakistan under

one roof:

Sales

Services

Spare parts

Promotions

DFML joined hands with MCB to put forward a unique offer for its customers. On booking of

hyundai santro customers were offered free cng for two months, lowest markup and insurance

rates in the market. The alliance was supported by extensive media campaign covering TV, Print,

Radio and BTL activities.

Hyundai Dealer Enhancement Program

Hyundai Motor Company introduced dealer enhancement program which focuses on Hyundai’s

image building and strengthening of dealers capabilities in Sales, Service and Spare Parts.

Revised Target Market

Our primary consumer target is middle to upper income group who need true value for

their money and comfortable ride in city conditions. Our primary business target is mid sized

to large sized corporates that want to help their managers and employees by providing them a

car for ease of transport. Our secondary business target is entrepreneurs and small business

owners who want to provide discounts to managers buying a new car.

Age Group

25+ married, unmarried, male, female, young executives

Social Class:

Middle class, Upper middle class, Lower upper class.

Revised Product feature :

Air conditioning with automatic climate control.

Automatic transmission, power windows, door locks and mirrors, Power Steering.

Advanced multi-speaker audio system, leather seats.

Air bags, ABS, alloy wheels, leather upholstery.

Keyless Entry, Car jammer (company approved).

Pricing Strategy:

Should focus on Differentiated pricing strategy.

By introducing new features there will be increase in cost of production, Company can adjust that

extra cost in selling cost. There is wide gap in prices with compare to its competitors so small

increase in price with revised features will not affect market loss of Santro.

Advertisement:

Road Shows

The company plans to stage road shows, to display vehicles in the pavilions during various college

festivals and exhibition.

Television advertisements

Advertisements to promote and market our product will be shown on leading television channels. Major

music and sports channels will promote and they will reach out to the target market will be promoted

through AAg, Geo News, Express News and Dawn News etc as it has more viewers.

Radio

Radio is the medium with the widest coverage. Studies have recently shown high levels of exposure to

radio broadcasting both within urban and rural areas, whether or not listeners actually own a set. Many

people listen to other people's radios or hear them in public places. So radio announcements will be made

and advertisements will be announced on the radio about the product features and price, qualities, etc.

Print Ads

Daily advertisements in leading newspapers and magazines will be used to promote the product. Leaflets

at the initial stage will be distributed at railway stations, malls, college areas and various other locations.

Workshops and Seminars

Workshops and seminars will be held in colleges and big corporate to make people aware about the

companys past performance and product features, its affordability and usage, vast distribution network.

Road shows will be conducted where free trials of the car would be given.

Banners, neon signs

Hoardings, banners, neon signs will be displayed at clubs, discs, outside theatres and shops to promote

our brand car.

Booklets and pamphlets

Booklets will be kept at car showrooms, retail battery outlets, etc for the customer to read. These

booklets will provide information about our company; the products offered which suits the

customers need accordingly.

DISTRIBUTION:

Same distribution channel will be utilized for the revised Santro. Authorized 3s dealer will offer

three types of services all over the Pakistan under one roof:

Sales

Services

Spare parts

Recommendations:

Technical support should be taken from Hynudai Motors in order produce high quality

luxury products.

Vendors should be equipped with technology and expects to produce quality row

material.

The name of company should be changed from Dewan Farooque Motors to Pak Hyundai,

or Hyundai Pakistan.

Offer some incentive as local assembler which are missing by Pak Suzuki and Toyota. Be

brave, offer comprative analysis with other 1000 cc cars and advertise it in the same

manner as company did for new audio in Santro because their product is better than that

(e.g. fuel economy, engine type, brakes).