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SWOT Analysis: Car Industry
SWOT Analysis: Car Industry
67
Car Industry:
SWOT Analysis
Dharmaraj C., Sivasubramanian M. and Clement Sudhahar J.
I
n India, after independence, industrialization has paved lization, the earning capacity of the middle-class people
the way for people to possess luxury items such as has also increased. Now-a-days, motor car is not only
television, refrigerators, home appliances, cars, etc. bought for social status, but as a necessary one. Taking into
Motor–car is one the consideration
of the commonly of the above, many
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used conveyances 1234567890123456789012345678901212345678901234567890123456789012123456789012345678
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automobile com-
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by the upper and 1234567890123456789012345678901212345678901234567890123456789012123456789012345678 panies turned to
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middle-class 1234567890123456789012345678901212345678901234567890123456789012123456789012345678 Asian countries,
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people. Before two 1234567890123456789012345678901212345678901234567890123456789012123456789012345678 par ticularly India
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decades, only a 1234567890123456789012345678901212345678901234567890123456789012123456789012345678
1234567890123456789012345678901212345678901234567890123456789012123456789012345678 and China. The
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few industrialists 1234567890123456789012345678901212345678901234567890123456789012123456789012345678
1234567890123456789012345678901212345678901234567890123456789012123456789012345678 automobile indu-
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and rich people 1234567890123456789012345678901212345678901234567890123456789012123456789012345678 stry in India is the
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owned cars. There 1234567890123456789012345678901212345678901234567890123456789012123456789012345678 eleventh largest in
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was a time when 1234567890123456789012345678901212345678901234567890123456789012123456789012345678 the world with an
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M r. D h a r m a r a j C . , A s s i s t a n t P r o f e s s o r, S c h o o l o f M a n a g e m e n t ,
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one had to wait for 1234567890123456789012345678901212345678901234567890123456789012123456789012345678
K a r u n y a U n i v e r s i t y , C o i m b a t o r e - 6 4 1 1 1 4 , Ta m i l n a d u , E - M a i l : annual production
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weeks, months or D h a r m a r a j b u s i n e s s @ gm a i l . co m
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even years to buy 1234567890123456789012345678901212345678901234567890123456789012123456789012345678
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D r. S i v a s u b r a m a n i a n M . , R e a d e r i n C o m m e r c e , G o v e r n m e n t
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a car in India. The 1234567890123456789012345678901212345678901234567890123456789012123456789012345678
A r t s C o l l e g e , C o i m b a t o r e - 6 4 1 0 1 8 , E .
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m a n i a n @ gm a i l . co m
option of Indian 1234567890123456789012345678901212345678901234567890123456789012123456789012345678 over take China as
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drivers was limited 1234567890123456789012345678901212345678901234567890123456789012123456789012345678
D r . C l e m e n t S u d h a h a r J . , A s s o c i a t e P r o f e s s o r , S c h o o l o f the world’s fastest
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to a few models. 1234567890123456789012345678901212345678901234567890123456789012123456789012345678
M a n a g e m e n t , K a r u n y a U n i v e r s i t y , C o i m b a t o r e - 6 4 1 1 1 4 , Ta m i l n a d u , growing car market
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E - M a i l : C l e m n s @ re d i f f m a i l . co m
But, after libera- 1234567890123456789012345678901212345678901234567890123456789012123456789012345678
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A Quarterly Journal
SCMS Journal of Indian Management, April - June, 2010. 68
number of units sold, and the automotive industry is one of through Questionnaire from 712 respondents, using simple
the fastest growing manufacturing sectors in India. Because random technique.
of its large market (India has a population of 1.1 billion; the
second largest in the world), a low base of car ownership Analytical Tool Used
(12 per 1,000 people) and a surging economy, India has
become a huge attraction for car manufacturers around the Friedman’s non-parametric test is used for SWOT analyses
world. Until the early 1980s, in India owning a car was to find the more influencing factors towards the car
considered to be a luxury possession. During those days manufacturers and service provided by the dealers to
there were only four producers of passenger cars, namely, determine the perceptual ranking. The Friedman test is a
Hindustan Motors (HM), Premier Automobiles Ltd. (PAL), nonparametric alternative to the repeated measures analysis
and Standard Motors Private Ltd (SMPL), and Mahindra and of variance. It is equivalent of a one-sample repeated
Mahindra (M and M) used to make utility vehicles (jeeps). measures design or a two-way analysis of variance with one
Initially these producers had obtained licensed technologies observation per cell. Friedman tests the null hypothesis that
from the UK, Italy, and USA then each had a very small output k related variables come from the same population. For each
level. During that era car manufacturing was licensed, case, the k variables are ranked from 1 to k. The test statistic
expansion was restricted; there were quantitative restrictions is based on these ranks. The Friedman test ranks the scores
in each row of the data file independently of every other
(QR) on impor ts.
row. Moreover the test statistic for the Friedman’s test is a
Since the liberalization era, much water had flown through Chi-square with a-1 degrees of freedom, where a is the
and currently, though several major foreign automakers like number of repeated measures. When the p-value for this
Ford, GM and Honda have their manufacturing bases in India; test is small (usually <0.05) we have evidence to reject the
null hypothesis.
Indian automobile market is dominated by domestic
companies. Maruti Suzuki is the largest passenger vehicle
This study covers the impor tant pre-purchase and post-
company and Tata Motors is the largest commercial vehicle
purchase behaviour of the respondents relating to the car
company while Hero Honda is the largest motorcycle
buying decisions. SWOT Analysis is a strategic planning
company in India. Other major Indian automobile
method used to evaluate the Strengths, Weaknesses,
manufacturers include Mahindra and Mahindra, Ashok
Oppor tunities, and Threats involved in a project or in a
Leyland and Bajaj Auto . This study makes a maiden attempt
business venture. It involves specifying the objective of the
toward evaluation of the maker of the cars and the service
business venture or project and identifying the internal and
provided by dealers in the customers’ perspective in order
external factors that are favourable and unfavourable to
to determine the factors that contribute to their perception.
achieving that objective.
Objectives of the Study
Strategic Uses of SWOT
A Quarterly Journal
SCMS Journal of Indian Management, April-June, 2010. 69
A Quarterly Journal
SCMS Journal of Indian Management, April - June, 2010. 70
Automobile companies star ted investing in service network 3. India is the fastest growing car market in the world,
to suppor t maintenance of on-road vehicles. Star ting in growth rate of 20 percent.
2000, some landmark policy changes such as removal of
quantitative restrictions and 100 percent FDI through 4. 2/3rd of auto component production is consumed
automatic route were introduced and expor ts were given a directly by OEMs.
thrust. The market experienced the thrill of intense
competition as a number of new cars, models were 5. Growth of domestic production, sales and expor ts of
launched. As such consumers in India found a wide range automobiles during 2001-02 to 2005-06 are shown
of car models to choose from. In other words, the below.
passenger car market in India changed into a buyer ’s market.
The car market is expected to see the remarkable growth
in car production, car sales and car expor t by the
Current Scenario
for thcoming years and the passenger car industr y now
has a new character. However, if we compare India’s
1. India is 11th largest passenger car market in the world.
per capita car ownership with some of the developed
2. India is the second-biggest market for small cars after
countries (Exhibit–1) we are behind the advanced
Japan. It accounts for 60 percent of the domestic
countries.
market.
Source: SIAM
Ta b l e 2 : A u t o m o b i l e S a l e s TTrr e n d s
Source: SIAM
A Quarterly Journal
SCMS Journal of Indian Management, April-June, 2010. 71
Source: SIAM
A Quarterly Journal
SCMS Journal of Indian Management, April - June, 2010. 72
Analysis and Discussion diversification (6.71), Strong dealer and service network
SWOT Factors for car Manufacturers –Strengths (6.39), large volume of production (6.37) and Established
base (5.81) which was ranked second, third, four th, fif th
To identify the strength factors for car manufacturer, the and sixth respectively.
Friedman’s test is used and the result of the test is given in
the Table 4. Therefore, it can be concluded that Suppor t from car
financiers, Product diversification, Strong dealer and service
The Friedman chi-square tests the null hypothesis that the network and Large volume of production are identified as
ranks of the variables do not differ from their expected value. major strength factors for car manufacturer.
For a constant sample size, the higher the value of this chi-
square statistic, the larger the difference between each SWOT Factors for car manufacturer –Weakness
variables rank sum and its expected value. For these rankings,
the chi-square value is 821.199; Degrees of freedom are
To identify the weakness factors of the car manufacturer,
equal to the number of variables minus one. The asymptotic
the Friedman’s test is used and the results are given in
significance is the approximate probability of obtaining a
Table-5.
chi-square statistic as extreme as 821.199 with nine degrees
of freedom in repeated samples if the rankings of each factors
It could be noted from Table 5 below that among the six
are not truly different. Because a chi-square of 821.199 with
nine degrees of freedom is unlikely to have arisen by chance, factors, Low level of safety features (3.78) was ranked first.
it has to be concluded that the 712 respondents do not It is followed by Low number of dealers (3.75), Lack of new
have equal preference for all factors. The above Table 4 technology (3.45) High maintenance (3.14) and Costly spares
por trays that among the ten factors, suppor t from car ( 3 . 1 1 ) w e r e r a n ke d s e c o n d , t h i r d , f o u r t h , a n d f i f t h
financiers (6.96) was ranked first. It is followed by Product respectively.
Ta b l e 4 : S W O T F a c t o r s f o r Ca r Ma n u f a c t u r e r – S T R E N G T H
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SCMS Journal of Indian Management, April-June, 2010. 73
It is concluded that Low level of safety features, Low number of diesel product (3.09), Growing demands (2.97) and
of dealers, Lack of new technology, High maintenance and Improvement in existing product (2.63) which was ranked
Costly spares are identified as significant weakness factors second, third, fourth and fifth respectively.
of the car manufacturers which will not suppor t them to
increase the sales or influence the people negatively towards Thus, it is concluded that Introduction of safety features,
brand preference. Launch of a new product, and Introduction of diesel
product are identified an oppor tunity factor for car
SWOT Factors for Car Manufacturer –Opportunity manufacturer and these factors are to be considered by
the manufacturer.
To know the oppor tunity factors for car manufacturer, the
Friedman’s test is used and the results are given in Table-6. SWOT Factors for car manufacturer –Threat
It is understood from the above Table 6 that among the five To identify the impor tant threat factors for car manufacturer,
factors, Introduction of safety features (3.16) was ranked first. the Friedman’s test is used and result of the test is given in
It is followed by Launch of new product (3.15), Introduction Table 7.
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SCMS Journal of Indian Management, April - June, 2010. 74
Ta b l e 7 : S W O T F a c t o r s f o r Ca r Ma n u f a c t u r e r – T H R E AT
It could be noted from the above Table 7 that among the dealers’ preference, the Friedman’s test is used and results
four factors, shrinking global market was ranked first. It is of the same are given in Table 8.
followed by Loss in market share (2.59) and Cut throat
competitions (2.36) which were ranked second and third It is clear from the above Table 8 that among the seven
respectively. factors, convenient place (4.59) was ranked first. It is
followed by Space (4.52), Change of genuine spare par ts
Hence, it is concluded that shrinking global market, Loss in (4.05), High technology equipments (3.73) and direct
market share and Cut throat competition are identified as a contact customers (3.72) which were ranked second, third,
major threat factor for car manufacturer. four th and fifth respectively.
SWOT Factors for service provided by the dealer Thus, it is concluded that convenient Place, Space and
–Strength Change of genuine spare par ts are identified as a
strength factor for service provided by the dealer
To identify the strength factors for ser vice provided by the which will influence the customers towards dealer
dealer which significantly influence the respondent towards preference.
Rank Square
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SCMS Journal of Indian Management, April-June, 2010. 75
Rank Square
SWOT Factors for service provided by the Dealer It could be noted from the above Table 10 that among
–Weakness the six factors, using new technology equipments (4.00)
was ranked first. It is followed by Opening new service
To identify the weakness factors for service provided by the centers (3.73), More sales promotion activities (3.50),
dealer which will not influence the customers towards Maintaining customer relationships (3.34) and Attending
dealer ’s preference, the Friedman’s test is used and the complaints promptly (3.27) which were ranked second,
results are given in Table 9. t h i r d , f o u r t h a n d f i f t h r e s p e c t i v e l y. I t c o u l d b e
concluded that Using high technology equipments,
It is noticed from the above Table 9 that among the seven
Opening new service centres, More sales promotion
factors, unskilled mechanics (4.51) was ranked first. It is
activities and Maintaining customer relationships are
followed by Poor equipments (4.46), Thin mechanic force
identified as major oppor tunity factors for ser vice
(4.22), Delay in service (3.77) and Monopoly behaviour (3.77)
provided by the dealers.
which were ranked second, third, fourth and fifth respectively.
Hence, it is concluded that unskilled mechanics, Poor SWOT Factors for service provided by the dealer
equipments, Thin mechanic force, and Delay in service are –Threat
identified as major weakness factors for service provided by
the dealer, which will not influence the customers towards To identify the major threat factor for service provided by
dealers’ preference. the dealer, the Friedman’s test is used and the results are
given in Table 11.
SWOT Factors for service provided by the dealer –
Opportunity It is understood from the above Table 11 that among the
four factors, Lack of latest market information (2.77) was
To identify the oppor tunity factors for ser vice provided by ranked first. It is followed by Competition (2.63) and Poor
the dealer, the Friedman’s test is used and the results are sales promotion activities (2.48) which were ranked second
given in Table 10. and third respectively.
A Quarterly Journal
SCMS Journal of Indian Management, April - June, 2010. 76
Rank Square
Thus, it is concluded that Lack of latest market problems, operation strategy, so as to reinforce the customers’
Competition and Poor sales promotion activities are identified trust and expectation and consequently attain
as major threat factors for service provided by the dealers. personal, professional and profitable relationship with
Implications of the Study customers.
1. Findings of this study indicate that it is wor thwhile (a) Increase the practice of awareness training,
for the dealers of automobiles to take note of the service workshops, complaint management
results of this study and formulate competitive systems and customer satisfaction surveys;
A Quarterly Journal
SCMS Journal of Indian Management, April-June, 2010. 77
(b) Have appraisal on the basis of customers’ information to the general public, car owners, dealers
feedback on the sales personnel and and car manufacturing companies in many ways. It is very
mechanics’ ability to maintain proper evident from the study that, manufacturer or dealer, in
relationship with customers; order to be successful, should refrain from treating all
customers’ requirements equally. The findings of the study
(c) Put in place ‘Assessment incentives’ on the are expected to help the dealers and manufacturers of
basis of customer rating as it happens in the automobile industry in understanding the elements of
educational institutions where students’
preference at market level. Findings also suggest that the
rating of teachers is of paramount
dealers can generate more customers by adapting proper
impor tance in assessing the per for mance
customer relationship management methods. The
of the teachers;
propensity to offer experiential and intangible rewards to
the customers that are relevant and perceived as high
(d) Dealers have to focus on their employees’
value in form of special recognition or special experience
interpersonal and selling skills and
as opposed to standard discount offer or gift type will
concentrate on the service ‘extras’ that
allow them to differentiate themselves from be more rewarding in the long run.
competitors; Keywords: SWOT Analysis, car manufacturer, dealers’
service, Friedman’s test.
(e) Focus on creating new customers for the
business, through maintaining good References
appearance and cleanliness of the
showroom, explanation for enquiries by the Auto India Vol. No.16, Issue II, April 2009.
employees and mechanics, prompt delivery
of the vehicle and integrity of the dealer;
and Conover. W.J. Practical Nonparametric Statistics. Third
Edition, Wiley, (1999): 367-373.
(f) Apar t from creating new customers for the
business, the dealers have to concentrate Hill, T. and R . Westbrook. “SWOT Analysis: It’s Time for a
on retaining the existing customers. This Product Recall.” Long Range Planning. 30 (1):
can be achieved by the dealer by satisfying (1997): 46–52.
the customers through building customer
relations, good behaviour of mechanics, Menon, A . et al. “Antecedents and Consequences of
using quality service equipments and new Marketing Strategy Making.” Journal of Marketing.
technology, change of genuine spare par ts, 63: (1999): 18–40.
spacious and convenient location of
service station and delivering the vehicle Ramanuj Majumdar. “Product Management in India.” Prentice-
on time. Hall of India (P) Limited. New Delhi, 3 rd Edition, 15 th
print. 2007.
Conclusion
When customers decided to buy / avail the par ticular J.Scott Armstrong. “The Value of Formal Planning for Strategic
product or service, before that they may have bundle of Decisions.” Strategic Management Journal. 3:
questions in their mind regarding that product and its (1982):197–211.
services. Based on the literature available on SWOT factors
relating to car manufacturer and service provided by the Sooraj Bhat and Puneet Dhamija, “The Indian passenger car
dealers, this study covers the consumers’ general opinion market: Outlook for Maruti.” Management Review .
towards the passenger cars and also provides useful December 1999.
A Quarterly Journal
SCMS Journal of Indian Management, April - June, 2010. 78
Websources ANNEXURE
STRENGTH WEAKNESS
a. Adver tisement ( )
a. Costly spares ( )
b. Durability /Ruggedness ( )
c. Established base ( ) b. High maintenance ( )
OPPORTUNITY THREAT
a. Growing demands ( ) a. Cut throat competition ( )
b. Introduction of diesel models ( ) b. Globalization and liberalization ( )
c. Improvement in existing product ( ) c. Loss in market share ( )
d. Introduction of safety features ( ) d. Shrinking global market ( )
e. Launch of new product ( )
STRENGTH WEAKNESS
a. Convenient place ( ) a. Delayed service ( )
b. Change of genuine spares par ts ( ) b. Heavy dealer charge ( )
c. Direct contact customers ( ) c. Monopoly behaviour ( )
d. Highly skilled mechanics ( ) d. Private auto garage ( )
e. High technology equipments ( ) e. Poor equipments ( )
f. Less competition ( ) f. Thin mechanic force ( )
g. Space ( ) g. Unskilled mechanics ( )
A Quarterly Journal
SCMS Journal of Indian Management, April-June, 2010. 79
OPPORTUNITY THREAT
a. Attending complaints promptly ( )
a. Competition ( )
b. Maintaining customer relationship ( )
c. More sales promotion activities ( ) b. Lack of business harmony ( )
d. Opening new service centres ( )
c. Poor sales promotion activities ( )
e. Quality service every time ( )
f. Using high technology equipments ( ) d. Lack of latest market information ( )
A Quarterly Journal