introduction to india.docx aman

8/10/2019 Introduction to India.docx Aman

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PESTEL ANALYSIS OF INDIA

1. Political Factors

Being one of the largest democracies in the world, India runs on a federal form of government.

The political environment is greatly influenced by factors such as governments policies,politicians interests, and the ideologies of several political parties. As a result, the businessenvironment in India is affected by multivariate political factors. The taxation system is well-developed and several taxes, such as income tax, services tax and sales tax are imposed by theUnion Government. Other taxes, such as octroi and utilities, are taken care of by local bodies.Privatization is also influenced and the government encourages free business through a variety ofprograms.

2. Economic Factors

The economy of India has been significantly stable, since the introduction of the industrial

reform policies in 1991. As per the policy, reductions in industrial licensing, liberalization offoreign capital, formation of FIBP and so on, has resulted in a constant improvement of Indiaseconomic environment. The country registered a GDP of $5.07 trillion in 2013 following afurther improved GDP growth rate of 5% in 2014 as compared to 4.35% in 2013.

3. Social Factors

The social factors refer to any changes in trends which would impact a business environment.For instance, the rise in Indias ageing population is resulting in a considerable rise in pensioncosts and increase in the employment of older workers. India has a population of more than 1.2billion people with about 70% between the ages of 15 and 65. Therefore, there are structureswith percentages according to age. These structures contain varying flexibility, in education,work attitudes, income distribution, and so on.

4. Technological Factors

Technology significantly influences product development and also introduces fresh cost-cuttingprocesses. India is served with both 3G and 4G technology which has facilitated several of theirtechnological projects. Furthermore, the country also possesses one of the strongest IT sectors inthe world, promoting constant IT development, software upgrades and other technologicaladvancements. Recently, India has also attempted to launch their satellites into space.

5. Legal & Environmental Factors

In the recent past, a number of legal changes have been implemented in India, such as recycling,minimum wage increase and disability discrimination, which has directly affected businessesthere. However,when it comes to environment, the quality of air in India has been adverselyaffected by industrialization and urbanization, also resulting in health problems. As a result, therehave been establishments of environmental pressure groups, noise controls, and regulations onwaste control and disposal.
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AUTOMOBILE SECTOR

Automotive industry is the key driver of any growing economy. It plays a pivotal role incountry's rapid economic and industrial development. It caters to the requirement of equipmentfor basic industries like steel, non-ferrous metals, fertilisers, refineries, petrochemicals, shipping,textiles, plastics, glass, rubber, capital equipments, logistics, paper, cement, sugar, etc. Itfacilitates the improvement in various infrastructure facilities like power, rail and road transport.Due to its deep forward and backward linkages with almost every segment of the economy, theindustry has a strong and positive multiplier effect and thus propels progress of a nation. Theautomotive industry comprises of the automobile and the auto component sectors. It includespassenger cars; light, medium and heavy commercial vehicles; multi-utility vehicles such asjeeps, scooters, motor-cycles, three wheelers, tractors, etc; and auto components like engineparts, drive and transmission parts, suspension and braking parts , electricals, body and chassisparts; etc.

Around the world, there were about 806 million cars and light trucks on the road in 2007,consuming over 260 billion US gallons (980,000,000 m3) of gasoline and diesel fuel yearly. Theautomobile is a primary mode of transportation for many developed economies. The Detroitbranch ofBoston Consulting Grouppredicts that, by 2014, one-third of world demand will be inthe fourBRICmarkets (Brazil, Russia, India and China). Meanwhile, in the developed countries,the automotive industry has slowed down. It is also expected that this trend will continue,especially as the younger generations of people (in highly urbanized countries) no longer want toown a car anymore, and prefer other modes of transport. Other potentially powerful automotivemarkets areIranandIndonesia.Emerging auto markets already buy more cars than establishedmarkets. According to a J.D. Power study, emerging markets accounted for 51 percent of thegloballight-vehiclesales in 2010. The study, performed in 2010 expected this trend toaccelerate.
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PORTER FIVE FORCES MODEL ON AUTOMOBILES SECTOR

Threat of New Entrants: MEDIUM

It is not that easy for an entrant to enter into a car industry because of the brand loyalty of

customers. However, some of the well known foreign companies entered into US car industry

easily, for instance, when Honda Motor, Co. opened its first office in Ohio, the major

competitions began. The expansion of the foreign entrants decreases the market of American

companies.

Bargaining Power of Suppliers: LOW

Suppliers have a little power in an automobile industry. Thats because numerous suppliers rely

on some particular auto manufacturers to buy their products. Each manufacturer has many

suppliers. For example,Toyota has more than 10 different suppliers in US. The mainqualifications of the suppliers are the quality, cost, and delivery of the products. If suppliers cant

meet those basic considerations, it is hard for them to survive.

Bargaining Power of Customers: HIGH

There are various brands and models of the cars to choose from nowadays. The factors that affect

consumer to make a buying decision are: the appearance, quality, price, and environmental

effect. People always want a new and nice looking car. For those rich people who love cars, they

always purchase the new released and attractive model. Besides that, the quality of the car is an

important issue. The car has to efficient, which means saving gas, protecting our safety, and

running fast. In addition, since there are many competitors, consumer have more choices to

select a cheaper, but good quality car. Moreover, because of the global warming and other

environmental effects, a lot of the manufacturers make their cars unique in order to protect the

environment. Based on a variety of the lifestyles, people choose to purchase a car in a different

way.

Threats of Substitutes: LOW

It is true that there are many of transportations substituting automobiles. They are bicycles,

subways, buses, and trains. These substitutions really make our life easier if we live in the cities.

On the other hand, for those people who live in Utah, upstate NY or suburb area, car is the only

transportation tool other than walking.


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Competitive Rivalry between Existing Players: LOW

Competition between existing automobile companies is high because there are too many choices

for the customers. That may cause the industry earning lower profits when the cost of the

competition is high.

However, more recent reports (2012) confirmed the opposite; namely that the automotive

industry was slowing down even in BRIC countries.


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INDIAN AUTOMOBILE

The automotive industry in Indiais one of the largest automotive markets in the world. It hadpreviously been one of the fastest growing markets globally, but is currently experiencing flat ornegative growth rates India's passenger car and commercial vehicle manufacturing industry is

thesixth largest in the world,with an annual production of more than 3.9 million units in2011. According to recent reports, India overtook Brazil to become the sixthlargest passengervehicle producer in the world(beating such old and new auto makers as Belgium, UnitedKingdom, Italy, Canada, Mexico, Russia, Spain, France, Brazil). Throughout the course of 2011and 2012, the industry grew 16-18%, selling around three million units. In 2009, India emergedas Asia's fourth largest exporter ofpassenger cars,behind Japan, South Korea, and Thailand.[5]In2010, India beat Thailand to become Asia's third largest exporter of passenger cars.

As of 2010, India is home to 40 million passenger vehicles. More than 3.7 million automotivevehicles were produced in India in 2010 (an increase of 33.9%), making the country the second(after China) fastest growing automobile market in the world in that year.According to theSociety of Indian Automobile Manufacturers, annual vehicle sales are projected to increase to 4

million by 2015, no longer 5 million as previously projected.

The majority of India's car manufacturing industry is based around three clusters in the south,west and north. The southern cluster consisting ofChennaiis the biggest with 35% of therevenue share. The western hub nearMumbaiandPunecontributes to 33% of the market and thenorthern cluster around theNational Capital Regioncontributes 32%.Chennai,houses the Indiaoperations ofFord,Hyundai,Renault,Mitsubishi,Nissan,BMW,HindustanMotors,Daimler,Caparo,Mini,andDatsun.Chennai accounts for 60% of the country'sautomotive exports.GurgaonandManesarinHaryanaform the northern cluster where thecountry's largest car manufacturer,Maruti Suzuki,is based. TheChakancorridornearPune,Maharashtrais the western cluster with companies likeGeneralMotors,Volkswagen,Skoda,Mahindra and Mahindra,Tata Motors,Mercedes Benz,LandRover,Jaguar Cars,FiatandForce Motorshaving assembly plants in the area.Nashikhas amajor base of Mahindra and Mahindra with a SUV assembly unit and an Engine assemblyunit.AurangabadwithAudi,SkodaandVolkswagenalso forms part of the western cluster.Another emerging cluster is in the state ofGujaratwith manufacturing facility ofGeneralMotorsinHaloland further planned forTata Nanoattheir plant inSanand.Ford, Maruti SuzukiandPeugeot-Citroenplants are also set to come up in Gujarat.KolkatawithHindustanMotors,NoidawithHondaandBangalorewithToyotaare some of the other automotivemanufacturing regions around the country.
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HISTORY OF INDIAN AUTOMOBILE SECTOR

The first car on India's roads in 1897. Until the 1930s, cars were imported directly, but in very

small numbers.

An embryonic automotive industry emerged in India in the1940s.Hindustanwas launched in 1942, long time competitorPremierin 1944. TheybuiltGMandFiatproducts respectively.Mahindra & Mahindrawas established by twobrothers in 1945, and began assembly ofJeep CJ-3A utility vehicles. Followingtheindependence,in 1947, the Government of India and the private sector launchedefforts to create an automotive component manufacturing industry to supply to theautomobile industry. In 1953 an import substitution programme was launched, and theimport of fully built-up cars began to be impeded.

However, the growth was relatively slow in the 1950s and 1960s due to nationalisationand thelicense rajwhich hampered the Indian private sector. Total restrictions for import ofvehicles were set and after 1970 the automotive industry started to grow, but the growth was

mainly driven by tractors, commercial vehicles and scooters. Cars were still a major luxury item.In the 1970sprice controlswere finally lifted, inserting a competitive element into theautomobile market By the 1980s, the automobile market was still dominatedbyHindustanandPremier,who sold superannuated products in fairly limited numbers.Duringthe eighties, a few competitors began to arrive on the scene.

To promote the auto industry the government started theDelhi Auto Expowhich was had itsdebut showcasing in 1986. The Auto Expo of 1986 was a window for technology transfersshowing how the Indian Automotive Industry was absorbing new technologies and promotingindigenous research and development for adapting these technologies for the rugged Indianconditions. The 9 day show was marked by then Prime MinisterRajiv Gandhi.

AUTOMOBILE INDUSTRIES OF INDIA

Mahindra & Mahindra

TATA MOTORS

STANDARD (INDIAN AUTOMOBILES)
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MAHINDRA AND MAHINDRA

Mahindra & Mahindra Limited(M&M) is anIndianmultinationalautomobilemanufacturingcorporation headquartered inMumbai,Maharashtra,India. It is one of the largest vehicle manufacturers by production inIndiaand the

largest seller of tractors across the world It is a part ofMahindra Group,an Indianconglomerate.It was ranked as the 10th most trusted brand in India, byThe Brand Trust Report,India Study2014. It was ranked 21st in the list of top companies of India inFortune India 500in 2011.

Its major competitors in the Indian market includeMaruti Suzuki,Tata Motors,AshokLeyland,Toyota,Hyundai,Mercedes-Benz (Merc)and others.

Mahindra & Mahindra, branded on its products usually as 'Mahindra', producesSUVs,salooncars,pickups, commercial vehicles, and two wheeled motorcycles andtractors.It owns assemblyplants inIndia,Mainland China(PRC), the United Kingdom, and has three assembly plants inthe United States. Mahindra maintains business relations with foreign companies likeRenaultSA,France.

M&M has a global presence and its products are exported to several countries. Its globalsubsidiaries include Mahindra Europe S.r.l. based in Italy, Mahindra USA Inc., Mahindra SouthAfrica[18]and Mahindra (China) Tractor Co. Ltd.

Mahindra started making passenger vehicles firstly with the Logan in April 2007 under theMahindra Renault joint venture. M&M will make its maiden entry into the heavy trucks segmentwithMahindra Navistar,the joint venture withInternational Truck,USA.

Mahindra has launched its relatively heavily publicised SUV, XUV 500, code named as W201 inSeptember 2011. The new SUV by Mahindra has been designed in-house and it is developed onthe first global SUV platform that could be used for developing more SUVs. In India, the newMahindra XUV 500 comes in a price range between Rs 11.40 lakh to Rs 15 lakh. The company

is expected to launch 3 products in CY'15 (2 SUVs and 1 CV) and an XUV 500 hybrid. M&Mstwo wheeler segment will launch a new scooter in Q1FY'15. Besides India, the company alsotargets Europe, Africa, Australia and Latin America for this model. Mahindra President MrPawan Goenka stated that the company plans to launch six new models this fiscal. The companylaunched CNG version of its mini truck Maxximo on 29 June 2012. A new version of Verito indiesel and petrol options was launched by the company on 26 July 2012 to compete withMaruti's Dzire and Toyota Kirloskar Motor's Etios.
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SWOT ANALYSIS

Strengths

Low labor cost:

India enjoys a comparative cost advantage in labour as comparedto western countries.

Skilled Manpower: India has vast pool of skilled manpower and qualifiedengineers among the largest in the world.

Weaknesses of the Automobile Industry

Low labor productivity: Cost advantage in labor wages is nullified by the fact that we have lower labor productivity.

Defect rates high: We have a higher defect rate about 10 times the world average.

Low Investment in R& D:The Industry has a very low investment in R & D as compared to their foreign counterpartswhich will their sustainability in the future.

Not reached critical mass: Indian companies are in nascent stage and hence not able to cater to the requirements ofOEMs. Our auto- ancillary industry is of 2.4 bn $ while Fords outsourcing budget is 86 bn$.

Poor infrastructure : Poor infrastructure like roads, ports, railways which lead tohigher logistics cost and lower reliability.

Opportunities for the Automobile Industry

Global automobile companies are setting up manufacturing facilities in India. Also, manyIndian automobile manufacturers have announced their plans to increase the export ofvehicles from India. The year 2002-03 has already seen a significant 65% increase in exportvolumes during the period April to March. This trend is expected to continue with moreglobal OEMs sourcing vehicles from their Indian plants.

Additionally, the introduction of newer technologies such as Electronic Diesel ControlSystems to reduce emission levels, safety devices such as Air Bags, Anti-lock BrakingSystems, etc. augur well for the Company and the automotive sector as a whole. Thesetechnologies not only offer increased safety for drivers and passengers, but also result ingreater comfort and better drivability.While there exist many opportunities for growth in business, there are also quite a fewfactors, which act as an impediment.


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