Company strategy analysis report on: Automobile industry- Germany & India
This report represents the various aspects and compares the automobile industry of two different geographical spaces: Germany and India. The auto industry has been one of the most emerging sectors on the face of earth. In the report, two companies of the auto industry of Germany and India are mentioned: The Volkswagen and Tata Motors. The study has been conducted considering the different segments of the auto manufacturing companies, such as passenger vehicles, commercial vehicles, utility vehicles, two wheelers and three wheelers. There is a brief about automobile industry background, representing its significance, scope and other aspects. The company background of Volkswagen and Tata Motors is briefed including their history, different operations and the potential. The micro environmental forces and macro environmental forces related to the products of both the companies are summarized. SWOT analysis on both company is performed. The strengths, weaknesses, opportunities and threats of Volkswagon and Tata Motors in the present scenario are taken into account.
This study represents the market segmentation of these two auto companies, their coverage of various markets and their marketing strategies are mentioned. There are some strategies of targeting markets; positioning strategies are explained in brief. Then in the end, there are certain recommendations for these two companies, based on this analysis.
Table of Contents
Topics Page No.
- Introduction 3
- Industry Background 3
- Company Background 5
- Macro environmental forces 6
- Micro environmental forces 7
- SWOT Analysis 7
- Market Segmentation 9
- Target Markets & Targeting Strategy 10
- Positioning Strategy 10
- Recommendations 10
- References 11
The purpose of this report is to represent the facets of two companies of same sector, i.e., Automobile industry, but in entirely different regions. Although there has been an economic slowdown, but despite of it, the automobile sector has been flourishing globally and has the potential of high growth in future. The two companies: Volkswagen of Germany, which is among global auto leaders; and Tata Motors of India, a domestic leader, having global potential are taken into consideration. Their background, operations, SWOT analysis, marketing strategies and various segmentations are explained. Through this report, the various important aspects of both the companies can be studied.
The automobile industry is considered as one of planet’s most important and high growth economic sectors by revenue. The industry is engaged into designing, manufacturing, marketing and selling commercial vehicles, passenger vehicles, automotive parts and others. According to the current trends of global automobile industry, the automotive industry in the developing countries has been showing higher growth rates than the developed countries which are showing stagnation due to drooping car markets. The auto industry has been facing challenges of economic uncertainties to new technologies, increasing consumer demands and economic slowdown. It affects the profitability of the companies.
As per the history of automobile industry, The United Nations dominated the auto industry all around the world with no significant competitors. In 1945, after the end of World War II, other technological nations, such as Japan and other European countries came forward and accelerated the automobile industry. And then after 1980s, the automobile industry of United States was surrounded by automobile companies of foreign countries, mainly vehicles from Japan and Germany.
German Automobile Industry
Germany is the European leader in car manufacturing. It accounts 20% of the total turnover of European auto sector. Over last year, German automobile manufacturing companies produced more than 11 million vehicles, which is around 17% of the global production. The German auto industry accounts for one of the largest employers in the country. At present there are six German multinational automobile companies which dominate the automotive industry in the country. These companies are Volkswagen AG, Ford Ltd, Daimler AG, BMW AG, Adam Opel and the Porsche.
The car segment in India has emerged as the promising and high potential sector which has been showing high growth trends in sales
In India, the economic sustainability, improving living standards and increasing purchasing power of Indian customer has given the Indian auto sector a boom. The auto industry in India is recording increasing growth rates in sales year after year. However, there are certain loop holes and weaknesses in the auto industry of India and some measures are needed to be taken by the industry and the government to overcome them. The evolution of Indian auto industry is given below:
Figure 1: Evolution if Indian Automobile Industry
Volkswagen is a multinational automobile manufacturing company of Germany. It is the largest automaker in Europe. The company was established in 1936 in Wolfsburg, Loer Saxony, Germany by Ferdinand Porsche Ferdinand Porsche. In German, “Volkswagen” means “people’s car. It manufactures passengers as well as commercial vehicles. Its current tagline is “Das Auto” means “The Car”. It contains a number of car brands: Audi AG, Bentley Motors Ltd., Bugatti SA, Lamborghini, Scoda Auto, SEAT and truck manufacturer Scania AB. These brands have their own features and they operate as a separate autonomous and independent entity in the market. The product spectrum ranges from low-cost small cars to luxury class vehicles to buses and heavy trucks: from family convertibles to exclusive sports car. It has 502,000 employees all around the world who produce over 34,000 vehicles per day.
Adolf Hitler, chancellor of Germany had assigned the project of developing a mass production car to an Australian engineer Ferdinand Porsche. NSU (Nazi Trade Union), a German vehicle manufacturer produced the cars and it was acquired by Volkswagen Group in 1969. The Volkswagen Group of companies has two divisions that are Automotive and Financial Services. There are 342 group companies included in Volkswagen Group. These companies are engaged in vehicle production and related automotive services, such as customer financing, banking, leasing and insurance activities. The Automobile division of the company is engaged in the development of vehicles, trucks, buses and parts of vehicles. It provides a complete comprehensive selection of vehicles that are individualized in terms of body design, elegance, quality, technology and safety features. The company operates 44 production plants in 12 Euro countries and 6 countries of America, Africa and Asia. The vehicles manufactured by the company are sold in more than 150 countries around the world. Around 50 percent of Volkswagen is held by Porsche Automobile Holding, 2.5 percent by Porsche Holding GmbH, 20 percent by State of Lower Saxony, 17 percent by Emirates of Qatar and 10 percent by the miscellaneous.
Tata Motors Ltd is the India’s one of the largest multinational automobile manufacturing company. The company is one of the many subsidiaries of Tata Group and the headquarter of the company is in Mumbai. The company operates in two major segments: automotive operations and other various operations. It provides engineering and automobile solutions, automobile components manufacturing and supply chain activities, construction equipment manufacturing, machine tools and factory automation solutions, electronic components and computer applications for automotive, retailing and service operations of automotive.
Tata Motors Ltd was established in 1945 and it has become the first company of engineering industry from India that was listed in New York Stock Exchange. It has its operations in UK, Thailand, Spain, South Korea and South Africa. In year 2008, it acquired two British automobile brands: Jaguar and Land Rover. It has emerged as key player in Indian automobile industry with significant revenue of USD 19 billion in 2011-2012. It is a leading manufacturer of commercial vehicles and ranks third in passenger vehicles.
Tata Motors has achieved many milestones by developing Tata Ace which is first domestic indigenous light-commercial vehicle; first sports utility vehicle of India, Tata Safari; first indigenously manufactured passenger car of India, Tata Indica; and cheapest car of India of World, Tata Nano.
The success of an organization depends on its abilities and efficiency of managing its marketing system with respect to its external environment. The macro environmental forces are assumed as the uncontrollable forces and they pose threats and create opportunities for company. The macro environmental forces include natural environment, such as major concerns of global economy, use of bio-fuels and using eco-friendly cars. The demographic factors are also one of the macro environmental forces, such as literacy levels, changing income levels and changing family structures. These forces affect the sale and profitability of the auto sector. Other macro factors are political factors, social factors, economic factors, technological factors and legal factors.
Micro environmental forces are the facrors associated with the company and to the particular industry itself. There are certain variables and conditions around the company and industry that affect its operations and performance. However, these can be controlled. The factors that can affect auto industry are organizational issues in response to environmental change, which involves strengths and weaknesses of the company in the environment, such as size of the organization, manufacturing capacity, employee relations etc.
For the success of any company, a deep analysis of various factors and aspects related with it should be performed, as it influences company’s performance. This can be accomplished through SWOT Analysis of the company. SWOT Analysis is an efficient strategic planning method which is used for evaluating the strengths, weakness, opportunities and threats.
The SWOT Analysis of Volkswagen is given below:
Strengths: It also emphasizes on anticipating the future needs of the customers and clients and processes them to convert into innovative technologies. The company has intensive research and development segment in order to tackle technological challenges. The company has been cutting defects by 60%, by improving on its quality.
Weaknesses: The company’s employee productivity is very low with poor cash flows. The continuous economic slowdown in the European countries is becoming a weakness for the company.
Opportunities: Increasing demand for hybrid electric vehicle is a good chance for Volkswagen for increasing its market share.
Threats: There are several key issues for Volkswagen group, such as extreme global competition from automobile manufacturers of America and Asia, stagnancy in demand due to overcapacity and product proliferation in western markets, slow revenue growth because of rising administrative and raw material costs, controlling cost while simultaneously generating revenue, and large foreign investment in the Chinese and Indian markets.
The SWOT Analysis of Tata Motors is as follows:
Strengths: Tata Motors is a strong domestic player in Indian market and is a key manufacturer of commercial vehicles. It is India’s largest auto manufacturing company in terms of revenue. It is among top three in passenger manufacturing vehicles in India with products in various segments, such as mid size car, compact cars and utility vehicles. The company is customer-oriented and emphasizes on customer preferences and taste. It is expanding the business by focusing on global markets, launching new products and acquiring foreign brands like Jaguar & Land Rover. The company also has strong Research and Development employing more than 3000 scientists and engineers.
Weaknesses: Tata motors still lack a high position in the luxury segment. The manufacturing of cars is based on third and fourth generation platforms which gives it a competitive disadvantage. The company targets for economy class rather than luxurious. It occupies limited consumer base by ignoring luxurious car segment. Its market share in passenger vehicles in India is quite low. The safety measures in the vehicles are also not up to the mark, for example, Tata Nano.
Opportunities: The acquisition of Jaguar Land Rover is an advantage for Tata Motors to get well established in marketing luxury segments. It has Tata Nano as an answer for cheaper market, such as China. It is also producing Super Milo fuel-efficient buses which are powered by super-efficient and eco-friendly engines. These buses have the capability of reducing fuel consumption by 10%.
Threats: There is high and threatening competition from passenger car manufacturers. Tata Motors needs to improve and develop in terms of quality and lean production. The recession and economic slowdown affects business in terms of revenue and increasing high production, and the sales decrease significantly. The steel and aluminium prices are also increasing and it is posing threat on costs of production. The diesel fuel, which is highly used in Tata Motor’s products, is becoming expensive globally and is affecting its sales.
The market segmentation of Volkswagen products aims at complete market coverage. It focuses on portfolio of product brands and long established international operations. It has a complex global product portfolio and production matrix.
Volkswagen is the most well established multi brand group in the auto industry. The products of the company range from low-consumption small cars to high luxurious vehicles. This group consists of ten brands of seven countries of Euro Union: Volkswagen Passenger Cars, Audi, SEAT, Bentley, SKODA, Volkswagen commercial vehicles, MAN Bugatti, Scania and Lamborghini. These brands have their own features and operate as independent body in the market in order to satisfy the needs of different segments in different countries. In commercial vehicle segment, the products include buses and heavy trucks. The huge portfolio of Volkswagen helps it to reach all major target global customers.
Tata Motors use market segmentation in strategic plan intervention. Each of the segments of Tata Motors produces huge range of vehicles for low, medium and high income group customers. For example, in 2009, the company launched its smallest and world’s cheapest car, Tata Nano which targets customers of low income group. The product range of the company includes passenger cars, such as Indica Vista, Indica V2, Indigo XL, Nano, Fiat, Jaguar Land Rover; Utility Vehicles (Safari Dicor, Sumo and Xenon); commercial vehicles, such as Medium & Heavy commercial vehicles (Tata Novus), Intermediate commercial vehicles, light commercial vehicles (TL 4X4) and small commercial vehicles; commercial passenger careers, such as buses, winger, magic; and defensive vehicle, such as logistics, tactical, armored and buses.
Target Markets and Targeting Strategy
The world is highly focused on emerging markets. With the help of liberalization, growth, and globalization of some new developing countries have become source of interest, opportunities and a challenge for multinational companies over the last two decades.
Volkswagen is appreciated specially for reaching out its target audience by means of innovative and attractive marketing campaigns that are designed to capture its exceptional brand essence. It aims at target different population and strives at covering the whole masses. The company manufactures Routan for minivan market, Tiguan for small SUV market, Touareg for large SUV market, CC for entry level luxury market, Rabbit and Beetle for sub compact market, Passat for midsize market, Jetta for compact market, Eos and Beetle for convertible market, Jetta and Passat Wagons for versatile markets and diesel for high fuel economy markets.
Tata Motors targets various different consumers. It produces Tata Safari for global markets, and Tata Nano for domestic markets. The marketing approach of the company is novel and is established on clear cut internet marketing guidelines. It integrates multiple media outlets in its marketing strategy. The company focuses on innovation and creation.
Positioning means designing a company’s image and offer, so that it can occupy a valuable place in customer’s mind. The positioning strategy aims at assuring to create a reputation in the market. It can be said that positioning is a method of differentiating, communicating and marketing. The automobile companies construct positioning strategies through advertisements and customer dealings.
Volkswagon as being among the market leaders in auto industry is a successful corporation because of its Products, Branding and Advertising. The marketing strategies of Tata Motors are very effective in automobile industry. Through SWOT analysis, it can be concluded that Tata motors possess great potential to establish itself in the global markets.
The sustainable development can be achieved by the company by first achieving commercial success. A successful company can ensure itself sustainable throughout and can handle all its processes. It can make valuable investments in the environment and develop sustainable products, services and solutions. The customer satisfaction should a main motto of the group in corporate success. The customer satisfaction can be explained in three categories: satisfaction with purchasing process, with product and with most recent workshop visit. There should always a proactive approach of reducing risk exposure to incorrect operations. The conservation of resources and several philanthropic activities should on chart for such a huge organization. The regular surveys are required to be performed to access the risk situation on continuous basis. The company should set up a research branch for analyzing causes of road accidents and to prevent them by introducing measures in their vehicles. The company needs to sustain its values and success and meet all the needs of the customers. There should always be an aspiration for changing the processes of system in organization with the changing global world.
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