“Automotive: Gaining the Required Edge”

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1) What are the key challenges faced by automotive manufacturers in India?

The automotive sector today is probably one of the most intensely competitive sectors with almost all the major car manufacturers having set up manufacturing facilities in India. This has led to competition in every category and sub-category in this sector. Technology as a product differentiator is only limited, with most manufacturers introducing models in India in line with their international product portfolios. The rapid sophistication in this sector in a very limited period has led to a world-class ancillary and component industry, which has resulted in foreign car companies having a relatively large indigenous content. This has greatly enabled manufacturers to reduce cost and maintain process efficiencies. All the 5 competitive forces viz. 1) Rivalry of Competitors 2) Threat of New Entrants 3) Threat of Substitutes 4) Bargaining power of suppliers & 5) Bargaining power of Buyers , are very high in the Indian Auto Industry.

They need to consider each and every Competitive strategy like Cost Leadership, Differentiation, Innovation, Growth and Alliance and need to adopt multiple Competitive strategies to survive in the long run. No single strategy will be effective for long and they need to implement a mix of 2 or more strategies at a time.

However, with a large no. of manufacturers, overcapacity will continue to exist and manufactures will have to keep a keen focus on product and process efficiencies while at the same time stepping up brand positioning to have enduring consumer appeal. This sector may also witness consolidation in the future, and companies with strong export orientation will continue to witness growth and profitability in the medium to long term.

The case talks of 2 drivers that are a major challenge for the automotive sector and can be considered in our discussion viz. a) Customer b) Competition.

Customer: With so many choices and options, the customer is truly the king and this is a major challenge to the automotive industry. They need to understand each and every customer’s needs, desires and wants and they have to be effectively translated back to the decision makers of the company for necessary actions. The automotive company can make use of Knowledge Management Systems to efficiently carry out such tasks. Creating a Virtual Company to educate the customer, has become a competitive necessity.

Competition: Cut Throat competition is visible in the automotive industry, be it new cars or pre-owned cars. Attractive Finance schemes, Discounts, Free Accessories, etc are used by Dealers to attract customers on the behalf of the manufacturers. Manufacturers in turn try to offer various options in the same vehicle to suit an individual’s budget, in short offering customized solutions to individuals. On top of that Automobiles have a relative shorter life span as compared to 10 years ago. The Automotive manufacture has to become an Agile Company and sustain this trend over a consistent period of time.

Other challenges that ACMA has pointed out, which the industry faces are as below.

External Level :

1)Integrating into Global Supply Chains:
Sourcing & Distribution has become Global and due to different in Political, Economic, Social,,Cultural & Technological environments, integration becomes a challenge.

2) WTO & FTA’s: There is an increased pressure on the Indian Govt. to follow/ come in line to the WTO regime, which could be a deterrent to the local industry.
FTA’s, could make exports expensive and non-lucrative ( for importing countries which are non FTA partners of India and vice versa.)

3) Crude Oil price: The rising oil prices, makes the end user think twice before going in for this big ticket purchase

Country Level :

1) Poor Infrastructure In India: India's road network, comprising of a modest national highway system (that is only2% or less of the total roadway length) is...
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