India’s Luxury Car Market ( The Competition Hots Up) Submitted to:- Submitted by:- Mrs Shailja Manocha Group No.:- 6 Submitted to:- Submitted by:- Mrs Shailja Manocha Group No.:- 6

Case Overview  Luxury Car as defined in case is car priced above $ 40,000.  In India, luxury car segment growing at 28% annually. Profile:- Earlier cars were considered a luxury only meant for Maharajahs (kings) and a few Wealthy traders. (cars were customized to please rich clients). Two wheelers were more popular in the markets primarly due to lower income levels and poor road conditions.  Luxury Car as defined in case is car priced above $ 40,000.  In India, luxury car segment growing at 28% annually. Profile:- Earlier cars were considered a luxury only meant for Maharajahs (kings) and a few Wealthy traders. (cars were customized to please rich clients). Two wheelers were more popular in the markets primarly due to lower income levels and poor road conditions.

Indian Luxury Car Market  Between 1950 & 1990 way to import cars was EOUs( Export Oriented Units) with huge turnover.  With liberlization, policies changed and so did consumer behavior.For many Indians car has beome more a lifestyle statement than a status symbol.  Fuel efficiency and price tags were no longer the main deciding factors for the buyer. Design and appeal in addition to a brand are the strongest drivers in the luxury segment.  Cars imported as CBUs against bookings only.  Between 1950 & 1990 way to import cars was EOUs( Export Oriented Units) with huge turnover.  With liberlization, policies changed and so did consumer behavior.For many Indians car has beome more a lifestyle statement than a status symbol.  Fuel efficiency and price tags were no longer the main deciding factors for the buyer. Design and appeal in addition to a brand are the strongest drivers in the luxury segment.  Cars imported as CBUs against bookings only.

Carmakers usually adopt Three Fold Strategy:- a) First create brand awareness about the product through exhibitions and advertisements. b) Established infrastructure with experienced dealer networks to further enhance their presence. c) Finally introduced the product line for the market. Themes adpoted by various companies to target the customer :- Hyundai :- Royalty. Honda:- Intrinsic Value and Past performance. Daimler:- Comfort and Class. Second importance was given to the choice and location of dealers.:-Showrooms in metros to serve the customer directly.

Competition Hots Up With the launch of more than 20 luxury models, the competition has become more intense but there are few challenges too for premium carmakers in India. - High Customs Duty ranging from 98% to 100% nearly doubles the price of the vehicle. - -Waiting Period ( 2 to 7 months). - Pot holes, traffic jammed roads of India. But still favorable economic policies and vast population are encouraging the automakers to have a foothold in India.

3 C’s o Company o Customer o competitor

COMPANY  General motors  BMW  Mercedes  Rolls-Royce  Lamborghini  Porsche  Audi  General motors  BMW  Mercedes  Rolls-Royce  Lamborghini  Porsche  Audi  Bentley  Nissan  Volvo  Toyota  Volkswagen  Skoda  Mitsubishi

CUSTOMER  Establish Industrialist,rich Businessmen Chief Executives of Companies.  Upper Class ( salary >100 lac p.a)  Establish Industrialist,rich Businessmen Chief Executives of Companies.  Upper Class ( salary >100 lac p.a)

CUSTOMER PERCEIVED VALUE  Product value  Services value  Personnel value  Image value  Product value  Services value  Personnel value  Image value  Monetary cost  Time cost  Energy cost  Psychic cost

CORE COMPETENCY  AUDI - TECHNOLOGY  BMW - TECHNOLOGY  NISSAN- OPERATIONS  PORSCHE- R & D  MERCEDES - LUXURY AND TECHNOLOGY  AUDI - TECHNOLOGY  BMW - TECHNOLOGY  NISSAN- OPERATIONS  PORSCHE- R & D  MERCEDES - LUXURY AND TECHNOLOGY

SEGMENTATION  GEOGRAPHIC Region City  GEOGRAPHIC Region City Whole India Class I cities, Metro Cities

DEMOGRAPHIC  Age  Family Size  Gender  Income  Age  Family Size  Gender  Income Above 18 yrs of age Anyone(single,married, with or without children) Male or Female High(above Rs.100 lakhs p.a)

Psychographic Segmentation  Grouping people according to attitudes, values, and lifestyles  Ostentatious and ambitious lifestyle  Grouping people according to attitudes, values, and lifestyles  Ostentatious and ambitious lifestyle

BEHAVIORAL  Occasions  Benefits  User status  User rate  Loyalty status  Readiness scale  Attitude toward product  Occasions  Benefits  User status  User rate  Loyalty status  Readiness scale  Attitude toward product Regular Lifestyle Statement,Royality, Features First time,Ex-user Medium to Heavy Medium Informed Enthusiastic

TARGETING  Upper class (>100 lakhs p.a)  Informed people with rich taste (Ex. Industrialists and youths)  Upper class (>100 lakhs p.a)  Informed people with rich taste (Ex. Industrialists and youths)

POSITIONING  Image positioning

THE PRODUCT HIERARCHY  Need family  Product class  Product line  Product type  Item  Need family  Product class  Product line  Product type  Item Transpot Automobile Four wheeler Luxury cars BMW,Mercedes,volvo, Porsche etc

THE PRODUCT HEIRARCHY  TRANSPORT Train Aeroplane Automobile Two wheeler Three wheeler Four wheeler Heavy vehicles Small Medium sized Luxury VOLVO FERRARI MERCEDES ROLLS-ROYCE VOLKSWAGEN (Need family)(product family)(product line) (product type) (Item or brand) (product class)

FIVE PRODUCT LEVEL  CORE BENEFIT: Transportation  BASIC PRODUCT: Engine  EXPECTED PRODUCT: Comfort,Luxury  AUGMENTED PRODUCT: Advanced security systems  POTENTIAL PRODUCT: luxury with high performance(average per litre)  CORE BENEFIT: Transportation  BASIC PRODUCT: Engine  EXPECTED PRODUCT: Comfort,Luxury  AUGMENTED PRODUCT: Advanced security systems  POTENTIAL PRODUCT: luxury with high performance(average per litre)

PRICING STRATEGY  LUXURY CARS COMPANIES FOLLOW “PREMIUM PRICING STRATEGY” AS THEY OFFER LUXURY AND COMFORT (VALUE) TO THE CUSTOMER AND CUSTOMER IS TODAY WILLING TO PAY FOR LUXURY.  LUXURY CARS COMPANIES FOLLOW “PREMIUM PRICING STRATEGY” AS THEY OFFER LUXURY AND COMFORT (VALUE) TO THE CUSTOMER AND CUSTOMER IS TODAY WILLING TO PAY FOR LUXURY.

PRODUCT-MIX PRICING  “OPTIONAL FEATURE PRICING”  MANY COMPANIES OFFER OPTIONAL PRODUCTS,FEATURES AND SERVICES ALONG WITH THEIR MAIN PRODUCT.  Ex. GPS System,sunroof and theft control  “OPTIONAL FEATURE PRICING”  MANY COMPANIES OFFER OPTIONAL PRODUCTS,FEATURES AND SERVICES ALONG WITH THEIR MAIN PRODUCT.  Ex. GPS System,sunroof and theft control

CONSUMER GOODS CLASSIFICATION  Speciality goods:  Because speciality goods have unique characteristics or brand identification for which consumers are willing to make a special purchasing effort.Luxury cars are speciality goods as interested buyer will travel far to buy one.  Speciality goods:  Because speciality goods have unique characteristics or brand identification for which consumers are willing to make a special purchasing effort.Luxury cars are speciality goods as interested buyer will travel far to buy one.

CONSUMER BUYING BEHAVIOUR  COMPLEX BUYING BEHAVIOR:  AS THE LEVEL OF INVOLVEMENT IS VERY HIGH  LEARN FEEL DO  COMPLEX BUYING BEHAVIOR:  AS THE LEVEL OF INVOLVEMENT IS VERY HIGH  LEARN FEEL DO

PROMOTION ADVERTISEMENTS IN  Print media  Magazines  News papers  Rational appeal  Direct Marketing  Motion Pictures ADVERTISEMENTS IN  Print media  Magazines  News papers  Rational appeal  Direct Marketing  Motion Pictures

CHANNEL DESIGN STRATEGY  PULL STRATEGY : As automobile(luxury cars) companies invests money in creating a “Brand”.  PULL STRATEGY : As automobile(luxury cars) companies invests money in creating a “Brand”.

DISTRIBUTION CHANNEL  Franchisee  Distributor  Dealer  Franchisee  Distributor  Dealer

CHANNEL LEVELS  Zero level ManufacturerCustomer  I level ManufacturerDealer Customer  Zero level ManufacturerCustomer  I level ManufacturerDealer Customer

General motors  GM cars and trucks were produced globally under the following 12 brands: Buick, Cadillac, Chevrolet, GM Daewoo, GMC, Holden, Hummer, Opel, Pontiac, Saab, Saturn and Vauxhall.

ENVIRONMENT Car Industry and CAR Market Early 1990‘s  Recession Late 1990‘s  Depreciation of Asian currencies  GDP growth fell  U.S. and East Asian markets slowed  European car sales held up Early 1990‘s  Recession Late 1990‘s  Depreciation of Asian currencies  GDP growth fell  U.S. and East Asian markets slowed  European car sales held up Luxury segment  Up-scale market  Main competitors: BMW,GM, Ford, Toyota, Chrysler, Mercedes, Volvo, Saab, Audi  Most companies operate with different brands

G. M. SWOT ANALYSIS  STRENGTHS  TECHNOLOGY POTENTIAL  QUALITY IMPROVEMENT  MODEL ACCEPTANCE HAS IMPROVED  STRENGTHS  TECHNOLOGY POTENTIAL  QUALITY IMPROVEMENT  MODEL ACCEPTANCE HAS IMPROVED

G. M. SWOT ANALYSIS  WEAKNESSES  Waiting period  Too Much Vertical Integration  WEAKNESSES  Waiting period  Too Much Vertical Integration

G. M. SWOT ANALYSIS OPPORTUNITIES  FAVOURABLE ECONOMIC POLICIES.  RISE IN LIVING STANDARD.  INCREASE IN CUSTOMER CONFIDENCE.  CHANGING CONSUMER DEMAND FOR NEW MODEL TYPES AND STYLES - EXPANSION. OPPORTUNITIES  FAVOURABLE ECONOMIC POLICIES.  RISE IN LIVING STANDARD.  INCREASE IN CUSTOMER CONFIDENCE.  CHANGING CONSUMER DEMAND FOR NEW MODEL TYPES AND STYLES - EXPANSION.

G. M. SWOT ANALYSIS THREATS  FOREIGN COMPETITION  HIGH TAXES FOR CBUs  INDIAN LEGISLATION AND REGULATION  POOR QUALITY OF THE INFASTRUCTURE IN THIS COUNTRY THREATS  FOREIGN COMPETITION  HIGH TAXES FOR CBUs  INDIAN LEGISLATION AND REGULATION  POOR QUALITY OF THE INFASTRUCTURE IN THIS COUNTRY

G. M. SWOT ANALYSIS  INDUSTRY ANALYSIS  MEGADEALERS AND AUTO SUPERMARKETS  WORLDWIDE DEMAND - STAGNATION - DECLINE  MUST BE WORLD CLASS IN EVERY RESPECT - PRODUCT, MFG. OPERATIONS, FINANCING, AND DISTRIBUTION  INDUSTRY ANALYSIS  MEGADEALERS AND AUTO SUPERMARKETS  WORLDWIDE DEMAND - STAGNATION - DECLINE  MUST BE WORLD CLASS IN EVERY RESPECT - PRODUCT, MFG. OPERATIONS, FINANCING, AND DISTRIBUTION

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