marketing strategy tkm

8/8/2019 Marketing Strategy TKM

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Term PaperResearch on Toyota Kirloskar Motor Private

Limited

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Introduction

Toyota Kirloskar Motor Private Limited (TKM) is an Indian jointventure between Kirloskar Group and world’s largest automobile

company by volume Toyota Motor Corporation.

TKM's growth since inception can be attributed to one simple, yetimportant aspect of its business philosophy - "Putting CustomerFirst". While managing growth, TKM has maintained its commitmentto provide quality products at a reasonable price and has made everyeffort to meet changes in customer needs.

TKM firmly believes that the success of this venture depends onproviding high quality products and services to all valued customersthrough the efforts of its team members.

TKM, along with its dedicated dealers and suppliers, has adopted the"Growing Together" philosophy of its parent company ToyotaMotor Corporation (TMC) to create long-term business growth. Inthis way, TKM aims to further contribute to the progress in the Indianautomotive industry, realize greater employment opportunities forlocal citizens, improve the quality of life of the team members andpromote robust economic activity in India.

All Toyota employees are expected to embody these values in theirdaily work, including environmental protection activities. To "respect"

the environment, we go to the source to identify and analyze problems("Genchi Genbutsu"), move forward to "challenge" conventional ideasand old habits, to improve further ("kaizen") through "teamwork."

The framework provided by The Toyota Way enables our company torespond to, among other things, the environmental challenges atvarious stages of the life-cycle of a vehicle. These include greenhousegas emissions, waste reduction, increased recycling and the banning of hazardous substance use in parts and components. These challengeswill have inevitable consequences for Toyota's organization andemployees, and we must balance them with our desire for future

growth. In 1992, the Toyota Guiding Principles were established indirect response to the international initiatives agreed to at the Rio'Earth Summit.' This summit focused on the potential for a clashbetween trade and environmental rules, and resulted in a statement of principles about forest management, conservation and sustainabledevelopment. The Toyota Guiding Principles are a cornerstone of Toyota’s corporate management philosophy. These principles were

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At TKM, they look to continuously improve not only products but alsoprocesses and service. Their obsession with perfection has beenrecognized by various institutions such as JD Power and TNSAutomotive, as well as automotive publications like Overdrive, as thereason for the success of Toyota products in India and across the

globe.

Local Community Development

At TKM, every effort is made to contribute to society. A residentialschool at Bidadi, reconstructed by Toyota, now houses 75 students,mainly belonging to backward communities. In the aftermath of thetragic earthquake in Gujarat, TKM and its dealers played a major role indistributing food, clothing and relief in remote affected area. TKM alsotakes a lead role in contributing to the community, distributing booksand bags in local school etc.

Competitors

The Indian car market is divided into various segments from SegmentA to E(with A being small car segment and E being the big luxury carsegment).Below graphs provide the category wise breakup of themarket share in each segment where Toyota is present based on thesales data of Jan-June 2010.

Fig. 1: Segment B Sedan

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Fig. 2: Segment C

Fig. 3: Premium D

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Fig. 4: Multipurpose vehicle

Fig. 5: SUV Medium

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Fig. 6: SUV Premium

Factors that affect the Industry

Michael Porter identified five forces that influence an industry. Theseforces are: (1) Degree of rivalry; (2) Threat of substitutes; (3) Barriersto entry; (4) Buyer power; and (5) Supplier power.

Like other industries operating under free market, capitalistic systems,viewing the automotive industry through the lens of Porter’s FiveForces can be helpful in understanding the forces at play.

Degree of Rivalry

Global companies today compete in the Indian market, while INDIANcompanies have globalized themselves. In the 1990s, after the openingup of Indian economy, many Global players entered INDIA and havebeen very focused in growing their shares of the market. The greatdiversity of rivals in terms of cultures and associated philosophies has

intensified rivalry in the industry. The degree of rivalry in the automotive industry is further heightenedby high fixed costs associated with manufacturing cars and trucks andthe low switching costs for consumers when buying different makesand models. The rivalry is especially very intense in the small car segment whereINDIA is emerging as a global manufacturing hub.

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Threat of Substitutes

The threat of substitutes to the automotive industry is fairly mild.Numerous other forms of transportation are available, but none offerthe utility, convenience, independence, and value afforded by

automobiles. The switching costs associated with using a different mode of transportation, such as train, may be high in terms of personal time(i.e., independence), convenience, and utility (e.g., luggage capacity),but not necessarily monetarily (e.g., round trip train fare would mostlikely be less expensive thanthe cost of fuel consumed on a similar round trip, daily parking, carinsurance, and maintenance). The exception to this statement occurs in the global urban areas withhigh population densities. In these areas, the substitutes available(e.g., walking, mass transit, bicycles, etc.) can be less costly or less

time consuming than automobiles and thus alternative modes of transportation are often preferred. The threat of substitutes is greater in individual segments of theindustry such as SUV’s due to ever increasing fuel prices andconsumers preferring fuel efficient cars.

Barriers to Entry

The barriers to enter the automotive industry are substantial. For anew company, the start-up capital required to establish manufacturingcapacity to achieve minimum efficient scale is prohibitive. Anautomotive manufacturing facility is quite specialized and in the eventof failure could not be easily retooled. Although the barriers to newcompanies are substantial, government push to increase FDI inautomobile sector is attracting Global automobile majors in INDIA.

Buyer and Supplier Power

In the relationship between the automotive industry and its suppliers,

the power axis is substantially tipped in the industry’s favor. Theautomotive industry is comprised of powerful buyers who are generallyable to dictate their terms to their suppliers. There are specificcharacteristics that make members of the automotive industrypowerful buyers: (1) there is not a grand proliferation of companiesmanufacturing automotive, and the four largest automotive companiesin the INDIA have roughly 90% of the value of shipments and valueadded in the INDIA (2) automotive parts (e.g., oil filters, mufflers, belts,

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etc.) are standardized commodities and these parts are only used onautomobiles; and (3) backward integration can and does occur veryoften in the industry.

In the relationship between the automotive industry and its ultimate

consumers, purchasers of finished vehicles, the power axis is tipped inthe consumers’ favour. Consumers wield the greatest power in thisrelationship due to the fairly standardized nature of the automotivecommodity (a vehicle) and the low switching costs associated withselecting from among competing brands. Also the Indian consumer isvery price sensitive and thus companies can’t take liberties in pricingbeyond a point. However, the automotive industry remains marginallypowerful due to the large customer to producer ratio. The automotive industry is a dynamic place. With the forces above atplay, and with history as a guide, it is safe to say that the automotiveindustry will continue to change, evolve, and adapt.

The Macro economic factors affecting the Industry

Demographic:

With rising disposable incomes in the average Indian household, themarket potential for automobiles is huge. There is a growing concept of second vehicle and people are graduating from 2 wheelers to 4wheelers.

Political:

With the opening up of Indian economy in 1991-92, there is constantpush from the government to the automobile sector by encouragingR&D, allowing FDI and granting of Special economic zones forautomobile sector.

Economic:

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The Indian economy is growing at a rapid pace with it being the secondfastest growing economy only after china. The average GDP for 5 yearsbefore recession was 8.8% and post-recession also the economy hasbounced back. The demand for automobiles by individuals as well asby industry is growing very fast and is attracting huge investments.

Technological:

The Indian automobile industry has come a long way from the era of Ambassadors cars with no technological enhancements over years. Today with so many players in the market, technology and innovationis becoming the deciding factor in the competitiveness of thecompanies. The introduction of the world’s cheapest car Tata Nano is ashining example of technological innovation in Indian Automobileindustry.

The product lineup

Product Key Point

Innova Created new segment named MPV – Multi Purpose Vehicle

FortunerRevamped the segment completely. Today it defines thesegment trend in industry. Fortuner’s today’s sales volumeis more than that of entire segment before its launch.

Land CruiserPrado

Has seen strong growth of % yoy in volume after launch of diesel version

Land Cruiser Flagship Land Cruiser brand across the world.

Corolla Altis World’s highest sold car till date.

Camry Prius

Toyota’s flagship hybrid brand is also world’s highestselling hybrid car.

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Product Segment

Innova Multi Purpose Vehicle

Fortuner Sports Utility Vehicle (Mid)

Land Cruiser Prado Sports Utility Vehicle (Premium)

Land Cruiser Sports Utility Vehicle (Premium)

Corolla Altis C Segment

Camry E Segment

Prius E Segment

Product Key Product Competition Current positioning

Innova M&M Scorpio, Xylo Multi Pleasure Vehicle

FortunerFord Endeavour, MitsubishiOutlander

The Art of Power

Land CruiserPrado

Audi Q5, BMW X5 All Terrain Luxury

Land Cruiser Audi Q7, BMW X7 The Pride of the World

Corolla AltisChevrolet Cruze, Honda Civic,Skoda Laura

Designed to InspireEnvy

Camry Skoda Superb, Honda Accord Beyond Excellence

PriusPlanet's FavoriteHybrid Car

The corporate and business level strategy

Entering into a small car segment

With the unveiling of Etios in Delhi Auto Expo 2010, Toyota announcedits foray into small car segment i.e. A and B Segment. This segment isalready cluttered and also a stronghold of Maruti Suzuki. Apart fromMaruti, Hyundai and Tata are dominating this segment. However, thekeen interest shown by multinational players like General Motors, Ford,Volkswagen, Nissan and Honda makes this segment very competitive. This market commands

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New plant

Second plant is coming up next to existing one, in Bidadi nearBangalore. The investment for this plant is estimated at INR 3,200

crore. Production capacity of 70,000 in first year and to be ramped upto 2 lac subsequently.

Localization

Small car market is much cost driven. To keep cost under control, TKMhas plan to increase localization of components. For launch of small car TKM will have around 60% of local content. (60% of cost of thevehicle). And it also plan to manufacture engine and chassis locally totake localization level to 95%. This is significantly higher than 20 to30% of localization in current range of Innova, Altis & Fortuner.

Dealer network

India is geographically vast country. And being close to customer isone of the most important determinants of purchase decision. Maruti,for example, has more than 600 outlets across India. TKM is set toincrease number of outlets from 102 (as on June ’10) to 150 by end of the year.

Connecting with TG – Toyota Q Promise and ATL

In India, Toyota is still perceived as a premium, high end and veryluxury car brand. This has led to “NOT FOR ME” imagery among smallcar buyers in India. To pacify this perception, Toyota rolled our bigcorporate campaign named – Toyota Q Promise. Q stands for Quality. This campaign followed the huge BTL event – Toyota Q World. In QWorld Toyota displayed its complete range including Etios (small car)to customers in 25 A & B cities. Whereas, Q Promise was ATL campaignpromoted heavily across array of media including Dailies, TV, Internet,OOH, Cinem Halls, SMS, Magazine etc.

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