Strategic Management Assignment 2


Case Study- Sonalika’s Foray into passenger vehicles

Submitted by -Munmun Mohanty 32A

Q.1 List out the reasons for Rhino's failure

Analysis of the issue:-

The underlying impetus behind Sonalika’s decision to venture into automobile market
through utility vehicles is the success of ITL in tractors. The problem was the assumption
on their part that the same technical and marketing expertise would pan out well in
the new segment too. They planned to capitalise on the opportunity which was brought
about by Toyota when it decided that Qualis should quit the market. The major issue was
the inability to keep up with the consumer needs and the lack of a “First Mover’s
advantage”. Although there was a void created by Toyota, the market had a near saturated
by a hefty market share by leading players like TATA and Mahindra already.

The following are the highlights of the key causes that led to failure

• ICML had set up a capability centre at Amb and had decided to rely on the existing
distribution network which was problematic since the reach to dealers and service
centres was very low.

• When the sale of Rhino was at it peak, the after sale service provisions and the resale
value were common areas of customer complaints on the online forum which later
overshadowed the positives and affected sales gradually.

• The Isuzu Engine was low on power which affected the performance of the engine.
• The positioning of the vehicle affected its image since targeted end user was collated
with the taxi segment. Hence it didn’t appeal to the urban buyers, thus affecting the
brand image.The awkward design gave a feeling of driving a tractor

• The absence of antilock braking system and airbags was seen as a major safety issue
and thus this deterred the buyers from option for Rhino.

• When Rhino was relaunched in 2012, the manufacturers were focusing heavily on
MUVs. The consumer preference had however shifted to smaller cars or “Mini SUVs”
 and the consumer perspectives were not incorporated into the product development and
strategies adopted.

Q.2 Branch out the future strategies for Sonalika.

PESTEL ANALYSIS

1. Political- Favourable

The government had termed the sector as the “Sunrise sector and major policy support was
given in terms of building a favourable ecosystem to improve the competitiveness of the
sector. Automotive Mission Plan 2016-26, was an ambitious mission to enable the sector to
contribute 12 percent to GDP.

2. Economic- Favourable

The sector had seen tremendous sale and india had grown to be a fast growing market with a
growth of 29% and 22% in 2003 and 2004 respectively. The number of household that could
afford a small car had risen by a CAGR of 16 percent.

3. Social- Favourable

The growing sale was a testimony to the fact that the sector had a growing acceptability
among Indians which was fuelled by growing disposable income and urban and rural
population both had significant role to play

4. Technological- Unfavourable

The technological prowess was seeing rapid instability with needs changing frequently. The
period of sustenance of a particular technology was low and it was only a matter of time
before it could get outdated. Continous investment in R&D by established played had set a
very competitive ground for any newcomer and the barrier was very high.

5. Environmental- Unfavourable

The environmental factors pushed the players to continuously come up with newer
technology which accentuated the pace for technological advancement thus making the
sector more complicated and competitive for a new comer.

6. Legal- Favourable

The policy support by government ultimately culminated into a favourable legal framework.
Rhino’s production facility was stained at a tax free location and the Bharat Stage III norms
could have been duly followed.
 A. 5 Porter’s Analysis of the Industry

Threat of Threat of Competition Bargaining Bargaining

New Substitutes from Power of Power of
Entrants Rivalry Supplier Buyer
High ✓
Medium ✓
Low ✓ ✓ ✓

C. 5 Porter’s Analysis of Segment MUV

Threat of Threat of Competition Bargaining Bargaining

New Substitutes from Power of Power of
Entrants Rivalry Supplier Buyer
High ✓ ✓ ✓
Medium ✓ ✓
Low

Since R&D remained with the parent company ITL, a joint venture would bring a fresh
perspective and strength of an already tried-and-tested R&D, which would help Sonalika
venture into the market leveraging other company’s strength, and would also not let the
initial investment done by ICML go to waste.

ICML had an operational facility for production of vehicles which also gave them a tax
benefit. This could be leverage upon and a joint venture with an organization that had the
capabilities of producing an MUV but was looking to enter into the Indian market, and was
in need of a production facility is an ideal strategy to be pondered upon.

The balance sheet of the group was virtually debt free which increased the valuation of the
company, hence ICML should not have been given up by the parent company and the entry
into the MUV segment could have been continued with the help of JVs.

The mistakes made by ICML in the second stage of the launch ( Not taking consumer’s
changing needs into account) could be treated as an opportunity to be leveraged on. Fresh
investments into getting consumer insights should be made and newer marketing strategies
must be adopted to increase brand awareness.