KIA MOTORS CASE ANALYSIS

Q-1 PORTERS 5 forces model:

The threat of new entrants:

As a barrier for new entrants in the automobile industry, an enormous amount of capital is required.
Besides capital, a new firm that is interested in entering the market needs to conduct in-depth research
beforehand.
The automotive industry in India is a mature one, with a turnover of ~US$70 Bn (2019), a related large
auto component industry valued at ~US$56.5 Bn in 2019, and 30+ manufacturers - a mix of homegrown
and international players.

Financial Economies of Scale - Large firms can benefit from superior interest rates and credit availability.
As a new entrant in the Indian market, Kia was up against Maruti, Hyundai, Tata, Mahindra, Toyota, etc.

Bargaining power of the suppliers:

KIA Motors India conducted its first supplier development event in New Delhi on May 29, 2018 and
invited over 150-odd automotive vendors from the northern belt and a similar event was held in Pune,
Bangalore and Chennai. Kia has shortlisted these vendors as the prospective suppliers of components for
all of its local production in India. These companies will set up their bases in a vendor park being
developed around Kia Motors’ 536-acre campus in Andhra Pradesh.
Supplier Component Vendor count

Korean Suppliers Prime Parts 45- 50%

Indian Suppliers Fabricated components 80%

( Effect on KIA)

● The number of suppliers in the industry is a lot compared to the buyers - suppliers have less
control over prices, which makes suppliers’ bargaining power a weak force.
● The products are fairly standardized, less differentiated and have low switching costs.

Bargaining power of the consumers

Since late 2018, the industry had been witnessing a prolonged recession. Several factors contributed to
this downturn, including hikes in fuel prices and an increase in vehicle-loan interest rates and vehicle
insurance rates. Additionally, the introduction of a new emission standard in India⎯Bharat Stage VI
(BS-6) emission norms⎯meant vehicles were more expensive. All of these factors had been further
compounded by the economic slowdown the country was facing, and 2019 was considered the worst year
for India’s passenger vehicle industry
In a challenging and slowdown impacted automotive environment in India, the bargaining power of
buyers has certainly gone up. Various manufacturers have been witnessed to be doling out large discounts
(often to the tune of Rs. 40,000 to Rs. 50,000) and extended warranty features – to lure the
‘price-sensitive Indian consumer’ during festive months such as Diwali.

Rivalry among existing competitors:

Competitive rivalry is extremely high in India, the 4th largest automotive market globally, and already 7th
largest manufacturer of commercial vehicles, and a critical net exporter- with automobile exports having
grown 14.5% during FY 2019.

Sno. Existing Competitors

1) Hyundai Creta

2) Mahindra & Mahindra XUV 500

3) Toyota Innova Crysta ( For Kia Carnival)

4) Tata Harrier

5) MG Hector
Threat of Substitute products

Number of substitute products available

In the beginning when Kia motors made their big entrance in the Indian market with Seltos, there was
almost no competition with the existing SUVs in their price range.
The launch of Hyundai Creta almost took the majority of the market from Kia. In the background,
growing fast was Tata motors Harrier, it was making an exceptional comeback with Harrier and was
offering at par or more advanced features than Seltos that too at the same price.
There was heavy competition from an up and coming brand MG Hector, their tagline (It’s a human thing)
caught the attention of people and made them stop and look at the brand in a different light altogether.
Mahindra & Mahindra went with the approach of making drastic changes in their existing very successful
model XUV 500. In a matter of months of their entry they were competing with big brands with loyal fan
bases in India, and in some cases a better product than Seltos.
The competition was not only limited to Seltos but to their other segment, the MPV segment, with
majority share in the market acquired by Toyota Innova Crysta, Innova is being dominating the market for
the past decade and has continued to do some with their loyal customer base and the excellent services
and features provided by them. The little share in the market saw them competing with Maruti
Suzuki Ertiga.

Relative price performance of Substitute

To make matters easy to understand, the immediate competitions and their prices were-

Sno. Kia Product Competitors

1) Seltos (9.66L Ex Showroom price) Creta ( 10L Ex Showroom price)

2) Seltos (9.66L Ex Showroom price) XUV 500 ( 14.25L Ex Showroom price)

3) Seltos (9.66L Ex Showroom price) Tata Harrier ( !4.30L Ex Showroom price)

4) Carnival (24.95L Ex Showroom price) Innova Crysta (16.53L Ex Showroom price)

*MG Hector was not taken into consideration because MG wanted to introduce a more premium
and exclusive brand.
*All the prices taken are the base price of the lowest model of the respective brand.
Q2. Points of parity points of difference

Parity:

● A firm delivery date

The order-to-delivery (OTD) process in the volume automotive sector is important for
automakers, dealers and customers. It affects the customer's experience with regard to receiving a
vehicle that matches their requested specification in a reasonable time and the costs of the
automaker in serving the market.
● Comprehensive warranty
Warranty management system plays an important role in the automotive industry as it allows
automatic tracking of products/services under warranty period, as well as allowing validity to
re-import the claim expense.
● Financing options
Variety of Financing options helps the brand to attract and retain customers

● The worldwide presence of the brand

Difference:

● A dealership located within reasonable proximity to your location where you can see the
models and service your future vehicles: From the outset Kia had a vast network in India⎯206
sales dealerships and 265 car display points in 160 locations across Tier 1, 2, 3, and even Tier 4
cities in India. Bhat claimed that this large number of dealerships made Kia’s diverse network one
of the largest of any new car entrant in India.

Sponsoring Athletes (Bengaluru FC):Bengaluru FC announced a landmark partnership with

automobile manufacturing giants Kia Motors who will now be the club’s principal sponsors in a
deal that runs through the end of the 2021-22 season.

Competitive pricing: Kia kept an aggressive on-road pricing of around ₹1.7 million for its many
variants, Seltos provided Indian consumers with the best features at a competitive price

Automatic climate control, an eight-speaker Bose sound system, leather upholstery, a sunroof,
and steering-wheel-mounted audio controls, among other features.
Q-3 Has Kia managed to create a distinct image for itself in the mind of the consumers?

● High Quality brand image

● Positioned as lifestyle product

According to automobile experts, the changing taste of Indian consumers, who were increasingly
demanding SUVs, was working in Seltos’ favor. Consumers wanted vehicles that were well designed,
besides having spacious interiors, a modern infotainment system, and good engine performance.
By offering all of these features, Kia was able to market Seltos as an aspirational SUV with its
contemporary design and features. The Seltos had a large front grille, called the Tiger Nose, which was a
unique Kia design element.
The Seltos interior encompassed a lounge-like cabin that had various premium features such as mood
lighting, a large touchscreen, an eight-inch head-up display system, automatic climate control, an
eight-speaker Bose sound system, leather upholstery, a sunroof, and steering-wheel-mounted audio
controls, among other features. All Seltos models were compliant with India’s newly introduced BS-6
emission norms.

Seltos provided Indian consumers with the best features at a competitive price. These aspects propelled
the demand for Seltos and made Kia India’s seventh-largest automaker by sales eight days after the Seltos
launch Consumer reviews for Kia’s offerings in India indicated that Kia had created the brand image of a
premium automaker whose products were considered aspirational by consumers. Brand experts observed
that Kia had a high-quality brand image among consumers. Kia had carefully nurtured this image over
time, maintaining a tone and tenor of advertising that had enabled it to position itself uniquely and to
create a perception of its brand image as being two notches ahead of the existing mass-market players.33
Kia’s advertisements proved to be quite distinctive and alluring for Indian consumers; its first TV
commercial became the most-watched ad on YouTube in India.

In India, Kia’s strategy was to enhance its brand perception and reputation through continued efforts
directed towards innovation in product development and to position its offering as a lifestyle product
rather than a mere mode of transport. The high quality of its products’ interiors and the company’s
emphasis on providing technologically enhanced features had enabled Kia to carve a distinct brand image
in the minds of Indian consumers.

Group Member-
1) Kunika Agarwal
2) Hemant Seth
3) Prajwal Maniyar
4) Amey Kulkarni
5) Siddhant Kaushilk