3.

Align, relate and pattern research

Hyundai Motor India Limited (HMIL) is a wholly owned subsidiary of Hyundai Motor
Company, South Korea and is the second largest and the fastest growing car
manufacturer in India. HMIL presently markets 20 variants of passenger cars in six
segments. The Santro in the B segment, Getz Prime in the B+ segment, the Accent
in the C segment, the Elantra in the D segment, the Sonata in the E segment.The
case describes in detail the entry, product, pricing, distribution and promotional
strategies of HMIL. The case briefs the challenges faced by the company and its
marketing plans in future. It also includes a note on the Indian passenger car
industry, the leading player and its marketing strategy.
Challenges Faced

To develop a strategy to regain its leadership status in the B segment

To develop more products in B and other segments in order to give more
options to the customer and compete with MUL
To overcome its limited production capacity

Analysis
Hyundai Motors
Segmenting:
HMIL served segments starting from B to E. The cars which HMIL sold ranged from
Hyundai Santro to Sonata. In this way, Hyundai catered to the upper class of the
society as well. In the B segment, when compared to MUL, HMIL had only one car
Santro whereas MUL had 3 models to serve the same segment Zen, Alto and
Wagon R. Also from the case, it is evident that the B segment was the highest
growing segment in the Indian auto industry and by having only one car to serve
this segment, their overall market share was less when compared to MUL. This was
even though Santro was initially the highest sold car in the segment.
Targeting:
HMIL initially wanted to introduce a C segment car to target the upper middle class.
However, their surveys indicated that the B segment (and hence demand for
smaller cars) was much more and hence they launched Santro to serve customers
in the B segment. Initially HMIL targeted customers from 35-45 years. With the
increase in competition from 2002 onwards, HMIL started targeting consumers in
the age group of 25-30 years as it believed that the average age of car buyers had
come down. It also targeted the luxury segments (D and E) where MUL did not have
a presence. Our primary consumer target is middle to upper income professionals
who need true value for their money and comfortable ride in city conditions.

HMIL marketing strategy focused on bring out the differentiating factors when
compared to its competitors. Santro was initially positioned on the design aspect.
Later on Santro was positioned itself as a complete family car. The brand was
targeting those users who wanted to upgrade into the B segment. Hyundai This was
when the target group of consumers was between 35-45 years. With the increase in
competition in 2002, Hyundai repositioned Santro as a sunshine car in order to
attract consumers from the 25-30 years segment. Sunshine was communicating two
intangibles: Freshness and youthful attitude. The brand was moving to a " Change
your life " positioning. With regard to the other models, Hyundai Accent was
positioned as a next generation car and this was highlighted by its base line The
Next Step. On the other hand, Hyundai positioned Sonata as a luxury/premium car
and emphasized on the same with the base line Dreamt by everyone. Owned by a
few.
4. E. Long-term and short-term possibilities of productivity of the firm
HMILs use of Opportunities in the Indian Car Market. The Indian economy was
liberalized in 1991. The industry became more investor friendly with the delicensing of automobile industry in 1993. This opened an arena of opportunities for
foreign car manufacturers. Hyundai entered Indian market in 1996. Before entering
the company conducted an in depth research of the existing situation of the
industry. According to their research the following opportunities existed in the Indian
market: The small car segment was neglected though a strong demand existed.
Similarly, the economic segmentation showed that no product existed in the lower
B segment. Existing products were technologically inferior.A large pool of cheap
and educated labour was underutilized.The government policies in certain states
were pro-investment and were doling out incentives to attract foreign investments.
HMIL took a number of steps to exploit these opportunities. HMIL targeted the small
car segment in the lower B division. As the demand already existed for this
segment, HMILs flagship product SANTRO was an instant hit. HMIL captured a
major share of the market by rolling out SANTRO in a record time of 17 months.
Indian cars were technologically inferior. HMIL came up with a superior product with
a lower cost. To manage lower costs Hyundai set up its manufacturing plant in
Chennai, India instead of assembly units. They also utilized the abundant cheap and
educated labor in the process. Tamil Nadu was extending concessions on land rates.
HMIL chose a strategic location in this state. It gave them access to both sea (port)
and land (national highway) transportation routes. The proximity to ports facilitated
exports. By 1999 the competition in the small car segment increased. To mitigate
the risk of operating with a single product, since 1999 HMIL has come up with newer
car models and also with variants of the existing models. HMIL also stretched the
length of its product portfolio from lower B to E segment. In 1999, HMIL introduced
Accent in the C segment. It was positioned as a technologically advanced car. A
diesel variant was introduced in 2002, with path breaking CRDi technology. HMIL
entered the luxury car segment Segment D with Sonata in 2002. It was positioned

as a premium car. HMIL realized that the average age of the first time car buyers
had come down. To attract this segment, HMIL targeted newer segments for Santro
by positioning it as the youth car the sunshine car in 2002. They came up with
variants like Santro Zing. To tap the growing rural market, HMIL came up with
innovative marketing strategies and involved dealers in the rural area in the effort
to ensure higher visibility and awareness about the products. In 2004 another
segment D car Elantra was introduced. Getz introduced in higher B segment filled
the only existing gap in HMILs product portfolio from segment lower B to D.

F. Concentration/focus on Production or Operations

Entry Strategy
Prior to the presence of Hyundai Motors in India, the country had its own share of
car providers ranging from Indian companies like Maruti Udyog Limited, Fiat to
foreign players like Ford Motors, Toyota Motors, Honda Motors etc. So rather than
just entering the market and then deciding on which segments to serve, Hyundai
Motors did a careful analysis of the Indian automobile industry. This was done
through discussions and surveys with dealers, consumers and vendors. It was only
after analyzing these results did HMIL release its first car. This analysis helped them
as prior to this, they had planned to release a car in the C segment but the analysis
told them that the most profitable and growing segment was the B segment due to
which they went ahead and released a car in the B segment.
Operation Strategy
To ensure that they have maximum profits, HMIL focused on creating a low cost
strategy. For this reason, they set up their own manufacturing plant in India to take
advantage of the low labor and manufacturing costs. This was opposite to what the
competitors were doing as they only had assembly units in India. Also in comparison
to other car companies, HMIL entered India by starting its own subsidiary whereas
other companies had entered through joint ventures with Indian companies. HMIL
was able to provide higher quality cars at lower prices when compared to its
competitors. This was as they were able to use better and the latest technology
while at the same time were able to use the low cost labor and other manufacturing
facilities available in India.
Product Strategy
While competitors imported their existing successful models from abroad for the
Indian market, HMIL went against the trend by developing models especially for the
Indian market. This allowed it to design cars suitable more for the Indian
environment and hence Indian tastes.

Also HMIL launched products in the segments where there was lesser completion
from MUL (who at the time was one of the biggest competitor) i.e. in the D and E
segment. This was through proper understanding of the Indian consumer
requirements.
Distribution Strategy
To ensure that Hyundai was able to react quickly to changing market needs, HMIL
followed a formal and meticulous procedure for choosing dealers. The main criteria
was to select dealers who would react quickly to changing market needs. The
procedure included dealers having to give their educational background, financial
background, notes on current future trends in the automobile industry etc. This
elaborate procedure allowed choosing those dealers through a scientific procedure
that were best suitable for a location.
On the whole, HMIL followed innovative marketing strategies as they focused more
on understanding what the consumers wanted and then promoting and placing their
products accordingly.
Opportunities in the early 1980s for Car Industry
Since independence till the early 1980s the car industry in India was tightly
protected by the government. The licensing system did not allow any Indian or
foreign new entrants in the market. Thought the middle class was growing the lack
of options and the high prices of cars stunted the growth of car industry. In the
absence of competition the Indian car industry was lagging technologically. For
India, the early-1980s brought a fresh breeze into the auto sector mainly with the
entry of Suzuki motors into car manufacturing. Maruti Udyog Limited (MUL) a joint
venture between Government of India and Suzuki Motors of Japan was formed with
GOI holding 74% stake. Maruti 800, popularly known as the people's car, was a
watershed in India's auto industry, registering a sales figure of more than 2,00,000
by 1999 from a mere 1,200 units in 1984. This marked the beginning of the reforms
in the car industry. Maruti made cars affordable and hence the industry started
witnessing unprecedented growth rates (18.6% CAGR). Partnering with a Japanese
firm resulted in technological advancement in the field. This exposure equipped the
Indian industry to handle the liberalization which happened in 1990s. The increase
in demand for cars fuelled the derived demand for spare parts and ancillaries. This
resulted in Indian component manufacturers entering into joint-venture agreements,
with European and US firms.
G. Quality reflective of competitiveness, Market Share and Production
Cost.
The Volvo Way to Market entails a radically new approach towards the tools used to
market Volvo cars to the general public.

Motor shows
Volvo Cars sees the need to expose the press and customers to its brand, products
and innovations, but motor shows are not always the best way to do this. Motor
shows are a rather traditional affair in which brands crowd out each other at set
times in the battle for press exposure, said Mr Visser.
That is why Volvo Cars will gradually reduce its motor show activities and remain in
one motor show per region per year: Geneva in Europe, Shanghai/Beijing in China
and Detroit in the United States.
Instead of following the traditional motor show calendar, Volvo Cars will embark on
a series of new initiatives that seek to have a stronger and more individual
approach towards the press and customers.
Similar to the Stockholm launch event for the allnew Volvo XC90 in August of this
year, the company will organise an annual Volvo event where the Volvo brand, new
products and innovations are presented in a manner that is commensurate with its
brand and identity.
Advertising
Volvo Cars advertising spend will not be at the level of its larger competitors. That
means the Volvo Cars message needs to stand out and the company will need to be
selective in terms of media channels. Volvo Cars plans to significantly increase its
investments in its brand message.
Sponsoring
Every brand in the industry is involved in some form of sponsoring activity, mostly
because it is regarded as a must have within the marketing mix. Volvo Cars
questions that logic and has decided to wind down most of its sponsoring activities.
Instead, Volvo Cars will increase its commitment and investment in the Volvo Ocean
Race. Rather than just another sponsoring activity, it sees the Volvo Ocean Race as
purely Volvo. It is the most competitive, fair and pure blend of people with nature.
Digital leadership
The biggest revolution currently underway in the car industry is not happening in
the headquarters of manufacturers themselves, but in peoples living rooms.
The vast majority of customers around the globe shops online nowadays. Rather
than going from dealership to dealership, car buyers now go from website to
website.
As a result, the first leg of the Volvo Way to Market focuses on digital leadership and
identifies three key elements:

Digital commerce
Volvo Cars will start to sell online gradually across the globe. But rather than a
replacement of our dealership network, online sales will complement our
dealerships. Volvo Cars has worked closely with its dealer network in developing the
tool in order to retain the personal touch that is so important in buying, delivering
and servicing cars.
A first, successful step in digital commerce was taken with the onlineonly sale of
1,927 Special Editions Volvo XC90 cars in September, and this success further
boosts the companys commitment to growing its digital commerce activities.
An industryleading configurator
Instead of the existing build up your car from scratch concept that is ubiquitous in
the car industry, Volvo Cars will offer customers a simple and functional experience
that starts with what it calls the designers choice: a fullyspecified car which the
consumer can then adjust based on personal taste and budget.
Once the choice has been made, the consumer receives a short video which shows
the car of choice in motion. This will result in a simple, cool, fun and premium
experience.
An industryleading website
The new Volvo Cars website is no longer simply a source of information. It is a brand
experience in which every screen and every single piece of information is laid out in
a Volvo way and in line with the Volvo brand and values

H. Probability or Possibility of efficiency in production and operations

The major challenges that HMIL currently faces is how to regain its leader status
and market share. We believe that HMIL needs to take multiple measures to achieve
their target. These measures are:
Continue to innovate
Emerging markets are a fertile ground for innovation. The challenge of reaching
dispersed, low-income consumers in emerging markets often spurs significant
innovation. These innovations will become the basis for 'attacker' strategies that
can be used to challenge the competitors. Innovations and improvements in
technology, design can help to manufacture higher quality cars at a lower cost. This
will help to attract more consumers. HMIL should focus on its strengths of delivering
excellent quality and performance.
Diversify

To ensure that it has its presence across multiple segments, HMIL should look to
manufacture and releases new models to compete with Maruti etc. They should add
new cars to their product line and get more into and within segments like the B and
C segment which are one of the fastest growing segments in the Indian auto
industry. HMIL should leverage on its ability to launch technologically superior
products and its innovative marketing strategies to come up with new models in the
existing product segments. This might cannibalize on the market share of their
existing cars like Santro and Accent but the effects of the same can be
advantageous to HMIL as it can attract competitors customers. They should look to
exploit the customer value perceptions concept that they have used till now.
Penetrate more into the rural markets
The rural markets are one of the largest untapped markets in India. HMIL should
look to target these segments by introducing lower cost cars. This will help them to
increase their market share and thereby to retain their leadership status.
Expansion of production capacity
HMIL should expand its production capacity in order to produce the required number
of cars to be released into the market. HMIL had a production capacity of 2,00,000
cars per year as against 5,00,000 cars churned by MUL in a year. It should make
sure that the production crunch that happened in 2004 due to the release of its new
model Getz should not repeat again. The lack of enough production capacity is
expected to affect the companys market share as it would not be able to fulfill
increased demand.
Strategy for Tata Nano
The great wonder car by Tatas has stunned the entire world. Critics who often said
that it was not possible to make a car at a price below $3000 were taken to a back
sit when Ratan Tata the chairman of Tata Motors unveiled this car in New Delhi at a
price of $2500. Much of India's low-cost production edge comes from cheap labor
and a large part of the low-cost assembly in factories and plants is done through
manual operations. However this situation is changing fast with companies wanting
to increase productivity by automating their lines. Tata cut costs by minimizing
components, particularly steel, and taking advantage of Indias low production
costs. Because of its size, it requires less metal, has a smaller and lighter engine
than other cars, smaller tube-less tyres and a basic interior. Tata divided the
components into two types proprietary designs and Tata Motors design. For
proprietary design components, Tata went with established suppliers who then
worked on the development from Indian technology centers hence saving further
cost. The cost associated with employing engineers in international development
centers was a costly affair which made Tatas use local design capabilities.
For components and systems designed in-house, Tata Motors chose suppliers with
strong process capabilities who could give valuable suggestions and improvements

in the designs. Nearly everything has been sourced locally and the Nano boasts of
greater than 95% of content sourced locally since day 1. Tatas suppliers were an
integral part of the design and development process. Tata not only worked on its
own processes but also helped its vendors innovate. Instead of annual contracts,
Tata went with long term volume contracts with its suppliers, driving down the costs
even further.
Segmentation and Targeting
The low-cost car is clearly intended for the masses. It should be aimed for the firsttime car buyer in India - a huge market despite the increasing number of cars in the
urban and semi-urban areas. It also attracts the buyers of other small cars like
Maruti 800. As the product is newly launched in the most competitive segment of
the market, a substantial promotion budget to sell the product to the customers is
needed. Geographical analysis of Indian population indicates that the consuming
population is concentrated generally in bigger cities. As Nano is designed for both
middle and lower income groups, they need to target cities where there is a good
mix of the working middle class and lower working class population. Further, they
can target the single working class, the newly married couples without kids &
married couples with 2 kids categories of Lifecycle segmenting. Also due to the low
price of the car, the rural market should also be targeted.