Strategy Development for Hyundai

1. Strategy Formulation
Sec A Group 5
Abhay Sharma 1A
Aniruddh Srivastava 9A
Devansh Doshi 16A
Manasi Jain 23A
Sachin Gupta 38A
Vidooshi Joshi 55A

2. Agenda
Segment
Strategic Elements
Forces
Trend Analysis
Future Projections
Vision
Strategy

3. Market share of different types of PV in India
60%17%
11%
12%
Sales
Hatchback
Sedan
SUV
MPV
Market Share by Brand of different Hatchbacks
49%
22%
12%
4%
3%
3%
3% 2% 2%
Maruti Suzuki
Hyundai
Tata Motors Ltd
Ford
General Motors
Honda
Volkswagen
Toyota
Others
Monthly sales for Indian hatchback manufacturers 2012- 13
Forces
Trend
Analysis
Future
Projections
Vision
Strategy
Formulation
Strategic
Elements
Hatchback Segment
• Hyundai entered in 1996 in India and has become
2nd largest car manufacturer and largest passenger
car exporter for 7 years in a row
• Market share of 14.4% in PV segment, 2nd to MSIL
• Currently has Eon, Santro, i10, Grand i10, i20 in
hatchback segment
Segment

4. 1. Indians were unsure about Korean
products especially automobiles. First task
was to develop a positive association with
Indian customers
2. Developing a corporate image for
Hyundai. Since cars are high involvement
product, customers will make a choice
looking on the maker, service support,
spares availability , quality etc. Hence the
launch of Santro should also launch the
corporate brand Hyundai.
3. The design of Santro. Santro was designed
to be a tall boy car and initial product testing
revealed that Indians did not liked the tall
boy design. So the unenviable task for
Hyundai was to make Indian consumers like
Santro.
4. The grip of Maruti on the Indian car
market. The B segment was dominated by
Zen which has proved itself to be a reliable
workhorse. Zen was the preferred and logical
upgrade to 800 and the car was considered
to be the most reliable and powerful in that
segment. To convert the potential Zen users
to Santro was really a nightmare for any
marketer.
Challenges for Hyundai
to launch Santro in 1998
The first ad introduced the brand and the company with a subtle statement : We settle
only for the best -> Followed by teaser ads which depicted Shah Rukh being convinced to
believe that Hyundai is serious about India, the quality issue and the brand Santro.
Finally came the launch ad which showed Shah Rukh who represented the Indian
consumer saying " I am Convinced" .
Repositioning – Santro variant
Changed design and launched
under the name Santro Xing.
Appeal to first time car buyers
not as an upgrade for 800.
TG was 25-30 years. Positioned
as Sunshine car and roped
Priety Zinta as the brand
ambassador.
Positioning
Family Car targeting maruti
suzuki 800 users who wanted
to upgrade.
TG was 35-45 years middleclass
Indians.
Ugly Car – Tall boy design
Performance, design aspect –
turned biggest disadvantage
into advantage
Runaway success within 4
years of its launch displaced
Zen as the second largest
selling car in India
Santro – the sunshine story
Forces
Trend
Analysis
Future
Projections Vision
Strategy
Formulation
Strategic
Elements
Segment

5. India’s hatchback segment over the years
Other compact cars like Matiz, Fiat Uno, Palio failed to gain traction in the market and were phased out. Maruti Suzuki 800, Alto, Tata Indica and
Hyundai Santro practically owned the hatchback segment until the recent entry of the foreign players.
Mini models dominated the market for most of the past decade but now the sales of the compact cars lead the hatchback segment and 12 brands
are producing models
Maruti took hold of the hatchback
market in 1980s when it introduced
the Maruti 800, a customised car
aimed at India’s mass market which
dislodged Hm’s Ambassador from pole
position. For an auto sector where
previous decade annual sales were
35,000-40,000 units Maruti was
manufacturing and selling 100,000
cars a year.
HMIL in 1998 became the first
carmaker to seriously challenge
Maruti’s dominance by
launching Santro, which was a
runaway success and became
the segment’s no.1 seller within
the year it was launched.
Maruti introduced WagonR in
response but the car did not
enter the market for 2 years due
to production cycle issues.
Tata Motors announced
India’s first totally
homegrown passenger
car, the Indica, in 1998.
Its rugged look was an
instant hit.
Forces
Trend
Analysis
Future
Projections Vision Strategy
Formulation
Strategic
Elements
Segment

6. Market Segmentation
Hatchback
Compact
Mini
Micro
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
2010-
11
2011-
12
2012-
13
Compact
Mini
Micro
Annual Sales by Hatchback sub-segments (number of vehicles)
Micro
• Tata Nano is currently the only micro car(non-electric) in the market, basic model costing less than 200,000
rupees. The model was marked as the world’s cheapest car. Though it initially performed well in India it
has been struggling off late
Mini
• This segment includes a mix of classic models such as the Maruti Suzuki Alto and Hyundai’s Santro Xing as
well as newer cars like Hyundai Eon. Basic models are priced from 300,000 to 500,000 rupees
Compact
• Tata’s Indica, Maruti Suzuki’s Swift. The basic models are priced at 400,000 – 500,000 rupees
Forces
Trend
Analysis
Future
Projections Vision Strategy
Fromulation
Strategic
Elements
Segment

7. Sales vs Price positioning of key hatchback models
Source: SIAM
Customers want
value for money not
just a low priced car
Forces
Trend
Analysis
Future
Projections Vision Strategy
Formulation
Strategic
Elements
Segment

8. Specification Comparison
Specification Maruti Suzuki Alto 800 Vxi Hyundai Eon Magna+
Cost INR 3.25 Lakh INR 3.5 Lakh
Displacement (cc) 796 814
Mileage (ARAI) (kmpl) 22.74 21.4
Central Locking Yes Remote
12V Power Outlets - 1
Adjustable Head-rests X Front & Rear
Seat Belt Warning X Present
Door Ajar Warning X Present
Steering Adjustment X Tilt
Forces
Trend
Analysis
Future
Projections Vision Strategy
Formulation
Strategic
elements
Segment

9. Specification Maruti Suzuki Wagon R Hyundai i10 Sportz
Cost INR 4.34 Lakh INR 4.36 Lakh
Displacement (cc) 1197 1197
Mileage (ARAI) (kmpl) 20.5 19.81
Anti-Lock Braking System X Present
Central Locking Present Remote
Airbags X 2 (Driver & Co-Driver)
Rain-sensing Wipers X Present
Fog Lamps Front Front & Rear
USB Compatibility X Present
Specification Comparison
Forces
Trend
Analysis
Future
Projections Vision Strategy
Formulation
Strategic
elements
Segment

10. • Only 13 cars per 1000 people
• 60% of the PV market is Hatchback segment
• Consumers are informed and they are value driven
• Huge growth potential for HMIL
CAR DENSITY
•Emerging markets are slowing
• Manufactured cars which suit Indian roads and Indian consumer tastes.
• Disposable income level is at a constant increase -> the number of first time buyers is huge
•Rapid urbanization – increase in Rural demand
•100% FDI in the automotive sector
• Govt. has granted concessions, such as reduced interest rates for export financing. Weighted tax deduction of up to 150% for in-house research and R & D
activities
•Several Indian firms have partnered with global players. While some have formed joint ventures with equity participation, other also has entered into
technology tie-ups. Establishment of India as a manufacturing hub, for mini, compact cars, OEMs and for auto components.
• Economies of scale achieved by existing players hard to surpass and difficult to discount.
• Existing distribution channels : these channels lend an unparalleled advantage to established players, almost impossible to replicate
• Existing service networks: these networks lend great strengths to established players, impossible to counter
• Preference for small and compact cars. They are socially acceptable even amongst the well off. Preference for fuel efficient cars with low running costs
• More and more emphasis is being laid on R & D activities carried out by companies in India
• Minimum fuel efficiency norms for Passenger Vehicles - 14 % increase in mileage by 2016-17 - CAFC
SOCIETAL FACTORS
• Large and growing domestic auto market
• Competition is huge in this segment – 12 brands are competing against each other in the hatchback segment
• HMIL has market share of 48% of the total exports of PV from India
TASK ENVIRONMENT
EXTERNAL ENVIRONMENTAL FACTORS
Trend
Analysis
Future
Projections Vision Strategy
Formulation
Segment Forces
Strategic
elements

11. • Hyundai is known for its innovation
• To give good quality used cars to Indian Customers. Vehicles are certified by Hyundai Engineers using 147 check points
• Creating brand image among consumers through aggressive investment in advertisement and sponsorships
• Hyundai products are not as cost effective since it doesn’t compromise on its quality
• Human centric, eco-friendly technologies and services
INNOVATION
• Will have to increase its rural reach
• High brand equity - Korean manufacture has become an Indian brand due to its long time presence in the Indian market
• Perceived as value for money vehicle which does not compromise on its quality
• India is a cricket crazy nation so tie ups with ICC the best possible marketing strategy
BRAND POSITIONING
• Management philosophy - . Realization of Possibilities, Unlimited sense of Responsibility , Respect for Mankind
• Core Values – Customer, Challenge, Collaboration, People, Globality
• Frequent change in management not good for the organization
• Car sales dropped in July 2012 when the sales and marketing head resigned
COMPANY CULTURE & VALUES
INTERNAL ENVIRONMENTAL FACTORS
Forces
Trend
Analysis
Future
Projections Vision Strategy
Formulation
Strategic
elements
SegmentSegment

12. OPPORTUNITIES THREATS
Car Density
• Tremendous growth opportunity for Hyundai in hatchback
segment
Societal Factors
• Disposable income level is at a constant increase -> the
number of first time buyers is huge
• 100% FDI in the automotive sector Government
concessions
Task Environment
• Large and growing domestic auto market
Innovation
• Human centric, eco-friendly technologies and services
• Govt. has granted concessions, such as reduced interest
rates for export financing. Weighted tax deduction of
up to 150% for in-house research and R & D activities
Brand Positioning
• Perceived as value for money vehicle which does not
compromise on its quality
• High brand equity - Korean manufacture has become an
Indian brand due to its long time presence in the Indian
market
Societal Factors
• Emerging markets are slowing
• Poor service network of Hyundai - Existing service
networks lend great strengths to established players,
impossible to counter
• Preference for fuel efficient cars with low running
costs
Task Environment
• Competition is huge in this segment – 12 brands are
competing against each other in the hatchback
segment
Brand Positioning
• Will have to increase its rural reach
Company Culture & Values
• Frequent change in management not good for the
organization
Forces
Trend
Analysis
Future
Projections Vision Strategy
Formulation
Strategic
elements
Segment

13. Per Capita GDP
Borrowing Rate
Automotive
Industry on a
growth phase
Positive correlation
with GDP growth
PV density really low for
India. Huge scope for
hatchbacks.
Forces
Trend
Analysis
Future
Projections Vision Strategy
Formulation
Strategic
Elements
Segment

14. • Car sales in India fell for the first time in a decade - down 6.69 per cent in 2012-13 -
as the automobile industry struggled to cope with demand slump due to a sluggish
economy
• The decline in passenger car sales last fiscal was also the steepest in the past 12
years when the segment declined by 7.73 per cent in 2000-01.
• Interestingly, total passenger vehicle sales grew 2.15% to 2.69 million units, with
people buying more sport utility vehicles (SUVs) in 2012-13
• Total sales of vehicles across categories registered a fall of 7.76 per cent to 14,86,522
units in March 2013, as against 16,11,525 units in the same month of 2012
Reasons:
• High interest rates, which
ranged around 11-15 per cent
• High fuel prices, mainly that of
petrol, also impacted car sales
• Industrial output also fell in
India by over 1%
• Stalled infra projects and slow
mining
Forces
Trend
Analysis
Future
Projections Vision Strategy
Formulation
Strategic
Elements
Segment
Growth in household income vs car sales Indexed Growth of disposable income, inflation and car sales

15. Demand
Drivers of
Automobile
Segment
Availability of
wider range of
products
Gradual shift to
higher segment
vehicles
Increase in
income levels
and purchasing
power
Availability of
low cost finance
Decrease in
vehicle
changeover
times Rapid
urbanization and
emergence of
tier 2 cities/ non
metros
Replacement of
aging four
wheelers
Growing Concept
of second vehicle
in Urban areas
Forces
Trend
Analysis
Future
Projections Vision Strategy
Formulation
Strategic
Elements
Segment

16. No longer seen as just basic
means of affordable transport
Hatchback is expected to drive
the market with higher-end
models competing directly with
entry level sedans
Mini and micro hatchbacks
expected to penetrate secondary
and tertiary markets; directly
competing motorbike and
scooter segment
Expected auto industry revenue
at end of FY2017: $127bn with
CAGR forecast: 8%for 2013-20
The Passenger Vehicle market of
India will even cross Japan by
selling about 5 million Vehicles by
2017-18
The Indian auto exports will be up
to $5.62 billion in the year ending
March 2011 and the same will
grow to $17.64 billion in 2015-16
1350000 1400000 1450000 1500000 1550000 1600000 1650000
2010-11
2011-12
2012-13
Annual Hatchback Sales
Forces
Trend
Analysis
Future
Projections Vision Strategy
Formulation
Strategic
Elements
Segment

17. Automotive Mission Plan 2016
 Tax holiday for Automobile Industry for investment
exceeding INR 500 crore
 One-stop clearance for FDI proposals in automotive
sector
 Deduction of 30% of net (total) income for 10 years
for new industrial undertaking
 State Government to be urged to offer Preferential
allotment of land to automotive plants, Continuous
uninterrupted power supply and promote Captive
Generation
Key Projects with Strategic Importance for India
• NHDP Project: Largest Highway Development
Project
• NSEW Project: Connecting North, South & East,
West lengths of India
• Golden Quadrilateral: Connects 4 metros
Forces
Trend
Analysis
Future
Projections Vision Strategy
Formulation
Strategic
Elements
Segment

18. • PPP of India is projected to increase
considerably, hence may lead to
shift of customers from 2 wheelers
to Cars
13.8
46.7 58.8
109.2
140.7
151.2
65.2
41
38
0
50
100
150
200
250
300
2000-01 2012-13 2015-16E
Growth in Population categories with Higher
incomes
Low Income (<45k per month)
Middle Income (Rs 45k-180k
per month)
High Income (> 180k per
month)
70.3 76.7
89.5
100.9
113.3
127
0
20
40
60
80
100
120
140
2012 2013 2014 2015 2016 2017
Automobile Industry Growth
Value (USD bn) Linear (Value (USD bn))
Forces
Trend
Analysis
Future
Projections Vision Strategy
Formulation
Strategic
Elements
Segment

19. What it takes to become a Global automotive production hub?
Attractive domestic
market & proximity to
other markets
Political and Business
Environment
Low production cost and
efficient supply chain
Technological capabilities
in a particular class of
vehicles
In becoming a
auto hub
Rapid Urbanization
0
10
20
30
40
50
1950 1960 1970 1980 1990 2000 2010 2020 2030
Urban percentage of Total Population
0
500
1000
1500
2000
2500
2010 2011 2012 2013 2014 2015
Per Capita GDP
Per Capita GDP (USD)
Indian Car Buyers Getting Younger
39 36 33
00
20
40
60
2000 2005 2010 2015
Forces
Trend
Analysis
Future
Projections Vision Strategy
Formulation
Strategic
Elements
Segment

20. Future Projections: Segment wise Vehicle Production in India Change in Consumption Pattern
Forces
Trend
Analysis
Future
Projections Vision Strategy
Formulation
Strategic
Elements
Segment

21. Lifetime Partner in Automobiles and Beyond
Car has become a life space that occupies a central role in people’s lives
Hyundai seeks to become a lifetime partner in the everyday lives of
customers
To come one step closer to its customers and become their beloved brand.
Hyundai is developing eco-friendly and human-oriented technologies for the
future
 Taking the customer
experience and
satisfaction to another
level
 Penetrate the service
centers and Distributors
network within tier-II and
tier-III cities
 Aggressively pitching
premium and micro
hatchbacks
 Improving the experience
of driving through tech
heavy customizations
Forces
Trend
Analysis
Future
Projections Vision
Strategy
Formulation
Strategic
Elements
Segment

22. Grand i10
(4.29L-6.41L)
 Grand i10 will slot into the segment above the existing i10, since Sub-compacts make up nearly
60 percent of the entire Indian car market, makes sense for Hyundai to offer Indian customers
two sizes of i10
 Specially Designed for Indian Market, with more boot space, Ground Clearance, rear air cond.
 Priced lower than chief competitor Swift, fuel-efficient, loaded with features (keyless start & go,
cooled glove box)
 Disadvantage: More suited as a four seater, rather than 5
• Rear defogger, ABS & Airbags only on Asta (top variant). Should have been optional
with the middle variant
What can be done???
 Automatic transmission should be included because of stop-and-go traffic of metros
 More focus on Mileage as Indian consumers are mileage driven
 Lesser price differentiation between i20 and grand i10, hence better positioning and differentiation are required
 2nd in sales after Swift; more marketing efforts, service centers and distributors in rural areas is the need of the hour
 Hyundai service costs needs to bring down as customers now look for maintenance and after sales cost
Forces:
 Economic Scenario: With improving economy, 5-6 lakh Premium hatchback will
become the choice of 1st car purchase Favourable
 Customer Preference: buyer today looks to buy a car for the family and subsequently
looks at the quality of the dealership for service Favorable
Forces
Trend
Analysis
Future
Projections Vision
Strategy
Formulation
Strategic
Elements
Segment

23. i20
(4.73L-7.67L) Positives Negatives
Strategy: What needs to be done?
 Automatic transmission
 Prices need to bring down to create better differentiation
with compact sedans and low category sedans
 Overhaul engine and steering related problems as product
recall might be imminent
 Since 2nd time buyers are most likely the user of Premium
hatchback like i20, hence things like quality of the
dealership for service, vehicle reliability and re-sale value
should be enhanced.
Forces
Trend
Analysis
Future
Projections Vision
Strategy
Formulation
Strategic
Elements
Segment

24. •The crude oil prices are high and are affecting the decision making Indian automobile customers
•The most important factor Indians weigh now is the fuel economy of the vehicle
•The biggest competitor for HMIL in India is MSIL and the positioning of its products is primarily based on mileage across
segments.
•Medium - Long term strategy for HMIL should be R&D and development of more fuel efficient engines, HEVs (Hybrid and
electric cars) and gradually reposition some of their more fuel efficient models to take away the advantage from MSIL
•Existing models of Hyundai in India are not far behind MSIL in terms of mileage
•More fuel efficient vehicles would also attract more customers specially in Tier 2 and 3 cities
Forces
Trend
Analysis
Future
Projections Vision Strategy
Formulation
Strategic
Elements
Segment
Global Crude Oil price

25.  Entering into micro hatchback segment: Apart from
Nano (unsuccessful), no other model exists (Short-
term)
 Sales are continually dipping for Nano because of
engine problems, wrong positioning (Cheapest).
Hyundai can leverage its technology and introduce
hatchback in this micro segment.
Forces
Trend
Analysis
Future
Projections Vision
Strategy
Formulation
Strategic
Elements
Segment
New launches:
Launch in Hybrid (HEVs) car Segment
Launch in Micro Hatchback Segment
 Toyota (Prius) and M&M have tried their luck in the
segment of hybrid cars, with no success, as very high
costs are involved in the production (High upfront
cost, cost of energy storage despite on-going fuel
savings)
 Develop in house R&D and develop Hybrid as
annoying sky rocketing prices of fuel and can get
Govts help (National Electric Mobility Mission Plan

26. •Working women specially in urban India have high disposable incomes and also enjoy decision making freedom
•Seeing the success of Hero Pleasure and TVS Scooty Pep, Hyundai can enter with a new product especially designed for women
•The positioning would be unique in India specially inclined towards women
•Blue ocean strategy to enter this lucrative segment, but Hyundai must develop a car specially designed for women in India
•Such experiments have been dome in the more mature economies of the west and Japan and have paid good dividends
•The attraction is not only in the color of the cars but also safety feature and comfort the car provides to the driver
•Competitors Honda, Nissan already have products in the category which they can launch in India when the market is ripe
•Product Kia Spectra already in other markets(Kia is under Hyundai Motor Corporation)
•Primary positioning is that it empowers women
Forces
Trend
Analysis
Future
Projections Vision Strategy
Formulation
Strategic
Elements
Segment
Women’s Car 19.7 22.3 25.7 27.5
0
50
1981 1991 2001 2011
Work Participation rate of Women