strategic road maps for auto mobile industry
TRANSCRIPT
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SCENARIO BASED ANALYSIS
AND STRATEGY ROADMAP
OF AUTOMOBILE
INDUSTRY AN INDIAN PERSPECTIVE
Submitted by Group 7
Abhilash P Tom (14P123)
Ankit Raja (14P128)
Heena Pahuja (14P142)
Karthik B (14P145)
Samarpan Jena (14P153)
Shatadal Ghosh (14P168)
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Contents
ACKNOWLEDGEMENT ............................................................................................................................. 3
AUTOMOTIVE INDUSTRY: FACTS AND FIGURES ..................................................................................... 4
KEY DRIVERS AFFECTING INDIAN AUTOMOBILE INDUSTRY ................................................................... 5
ECONOMIC FACTORS INFLUENCING INDIAN AUTO INDUSTRY .............................................................. 6
DRAWING A PARALLEL WITH CHINA ....................................................................................................... 7
DEVELOPMENT OF SCENARIO BASED PLANNING ................................................................................... 8
PROCESS STEP1: DEFINITION OF SCOPE ............................................................................................. 8
SWOT ANALYSIS .............................................................................................................................. 9
PROCESS STEP 2: PERCEPTION ANALYSIS ......................................................................................... 10
PROCESS STEP 3: TREND AND UNCERTAINTY ANALYSIS ................................................................... 13
PROCESS STEP 4: SCENARIO BUILDING ............................................................................................. 13
PROCESS STEP 5: STRATEGY .............................................................................................................. 15
CHALLENGES FACED BY AUTOMOBILE INDUSTRY ................................................................................ 17
AUTO INDUSTRY OUTLOOK 2014 2020 (FIVE YEAR ROADMAP) ........................................................ 19
MAJOR REGULATIONS IMPACTING THE AUTOMOBILE INDUSTRY IN THE NEXT 5 YEARS: ................... 21
INNOVATIONS (5 YEAR ROADMAP): ..................................................................................................... 23
INNOVATIONS - AUTOMOBILE SECTOR (15 Year Road Map): ............................................................ 26THE FUTURE OF AUTOMOBILE INDUSTRY (15 YEAR ROADMAP) ......................................................... 27
CONCLUSION ......................................................................................................................................... 33
REFERENCES / BIBLIOGRAPHY .............................................................................................................. 34
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ACKNOWLEDGEMENT
The happiness that follows the successful completion of any project would be incomplete
without the acknowledgement of people whose endless support and contribution made it
possible and whose guidance and mentorship helped us immensely in our project.
We would specially like to thank our mentor guide Prof. Subhulakshmi Sircar for her
extensive support in the overall design and streamlining of the entire report without which
the report could not have been in its current state.
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AUTOMOTIVE INDUSTRY: FACTS AND FIGURES
Indian automobile industry is a key player in global context and the policies, actions taken by it will
have a significant impact on the global automobile industry. In terms of size of the industry, India
stands sixth in the global market and it is expected to become fourth in the following year; third by
2020 followed by china and the US. By mid 2030s, the sales of Indian automobiles are expected to
exceed that of US.
By 2018 the Indian automotive industry is expected to reach a volume of 37,000 thousand units
which is approximately 70% higher than that of in 2014. Currently India is in the top 10 in different
classes of automobiles. Motorcycles are the largest segment accounting for around 80% of total
industrys sales volume.
India is currently a global hub for the automobile industry which leading multinationals setting up
plants across India. Currently India has around fifteen manufacturers of passenger vehicles and
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MUVs; nine manufacturers of vehicles in the commercial space; sixteen companies producing two or
three wheelers; fourteen companies producing tractors and around five engine manufacturing
companies.
The distribution of various manufacturing companies spread across India could be illustrated asbelow
KEY DRIVERS AFFECTING INDIAN AUTOMOBILE INDUSTRY
Several key drivers have been identified which would significantly influence the growth projections
of the Indian auto industry. They are
Infrastructure Improvement
Rising household incomes
Regulations from the government
Public transport system
Lifestyle of Indian households
Penetration of low cost segment vehicles
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As per reports by major consulting firms, the automobile sales, including passenger sales,commercial vehicles, and two wheelers; have been concentrated in Indian sub continent. Theoriginal equipment manufacturers have been shifting towards Asian countries, primarily India, China& Japan. 65% of the automobile sales are expected to be from Asian countries.
DRAWING A PARALLEL WITH CHINA
India and China are the largest automobile markets in the Asia pacific region in terms of volumes aswell as values. As on December 2013, India occupies 6 per cent of Asia s automotive industrywhereas China occupies a larger chunk accounting to around 43 per cent in terms of market value.The Indian automobile market is expected to reach $150-200 billion in terms of revenues by 2030
and per unit sales of India and China would exceed 10 million by 2030.
The GDP growth in real terms as well as GDP per capita income of India and China has beenincreasing at a continuous pace post liberalization. The FDI inflows into the correspondingeconomies also have been growing at a significant rate.
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DEVELOPMENT OF SCENARIO BASED PLANNING
Scenario based planning is employed for any industry as a part of strategic planning while
performing long term planning. This primarily comprises of six steps
PROCESS STEP1: DEFINITION OF SCOPE
This is the first stage in developing the scenario based planning in which the Framing Checklist is to
be prepared. This checklist answers five questions which are required for starting the scenario-based
strategic planning.
These steps are:
1) Goal of Scenario project
2) Strategic level of analysis
3) Definition of stakeholders
4) Participants
5) Defining the time horizon
Goal:
To become a major auto player in the world
Strategic Level of analysis:
Business level
Stakeholders:
Internal: Senior and top management of the firm
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External: People who are not directly linked to the firm but have sufficient knowledge of the
sector and are consultants to the industry
Participants:
Top management with selected participants from various departments viz. Research &
Development team, Marketing and Operations team, managers in various domains etc
Time Horizon:
5 years to 15 years
SWOT ANALYSIS
In order to evaluate the strengths, weaknesses, opportunities and threats; and also to evaluate the
automobile industry, the SWOT analysis has been performed considering the current Indian scenario
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PROCESS STEP 2: PERCEPTION ANALYSIS
The second step of the scenario based planning focuses at analysing the perception, which involves
assumptions and considerations undertaken by the participants who are involved in the scenario
based planning.
In this step there are three main objectives which are to be fulfilled. The first objective is to identify
the factors involved which could influence the future of the industry. The second objective is to
identify the impact and uncertainty of these individual factors on the Indian auto industry. This could
be done by creating a rating scale of 1-10. The final objective is to benchmark the perspectives of
various stakeholders who are involved in the scenario building process.
The below identified factors have their effects on the Indian auto industry:
Political
1) Geopolitical stability and expansion policies
2) Made in India as key focus
3) Easy policy framework for FDI in manufacturing
4) Govt expenditure in R&D
External
1) Global Steel Prices
2) Global Oil Prices
Technological
1) Operational Improvement
2) Availability of Good Suppliers
3) Manufacturing capacity and capability
4) New technology and market concentration
Environmental
1) Sustainable green manufacturing
2) Development of green technology
Social/Economical1) GDP growth and FDI
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2) Rise in disposable incomes
3) Growth in services/manufacturing industries
4) Education and infrastructure (road networks)
In order to proceed with the analysis, all these factors should be marked with codes as below
The factors identified in the above step are correlated with an impact and uncertainty index ranging
from 1-10 based on their significance towards the industry
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Based on these impact and uncertainty values of individual factors, a spider web diagram is created.
The primary purpose behind creating the spider web diagram is to identify the existence of blind
spots, if any.
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PROCESS STEP 3: TREND AND UNCERTAINTY ANALYSIS
In this phase, the factors are plotted on a graph with uncertainty on x-axis and impact on y-axis. This
graph helps in identifying various zones as below
PROCESS STEP 4: SCENARIO BUILDING
Among the uncertainties explained earlier, the key ones are technology, market concentration and
geopolitical policies of the government.
Based on the two scenario dimensions four scenarios A, B, C & D are formed
Scenario A
Favourable technology, market conditions and favourable government policies
Scenario B
Unfavourable technology, market conditions and favourable government policies
Scenario C
Favourable technology, market conditions and unfavourable government policies
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Scenario D
Unfavourable technology, market conditions and unfavourable government policies
The analysis of each of the scenarios is better explained with the help of the below picture
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PROCESS STEP 5: STRATEGY
The outlook of Indian automobile industry in 2015 could be defined by various trends in the industry
such as
Positive outlook:
The existing issues of over capacity and heavy competition, which the industry has been facing since
FY 2011-12, are mitigated by delaying the proposed capacity addition and adjusting the sales volume
could improve the credit rating of the industry.
Continued weak demand:
Post the general elections in India, the consumer vehicles (CVs) and passenger vehicles (PVs) sales
have decreased; the rupee valuation in the global markets also shows significant impact on the
industry outlook.
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Exports to foreign markets:
The share of exports on the total sales volume of the industry is maintained in the range of 16-21%
for the last 5 years. The trend is showing an increase in the exports to international markets,
particularly to South East Asian economies and African sub continent. Within passenger vehicles,utility segment occupies a smaller pie of exports whereas most of the exports are concentrated in
compact size segment.
The automobile industry is a growth industry. Across the globe, from China where there is a boom in
sales and production to the US where a strong recovery continues to surpass expectations. Clearly
the automobile industry is a growth industry. However the automobile sector is daunted by some
unprecedented challenges.
The leaders have to create coherent strategy, clearly define the goals and objectives and devise
ways to rope in the right people. The key to success in this dynamic environment is as follows.
Close attention to the market dynamics and changing thecompany's positioning to reap the maximum benefits
Eg- China is booming and US making a strong recovery, Russia isfacing a slowdown.
Know the market
Car buying decision rational as well as emotional Car companies need to build good products and back it upwith good service to establish good rapport with consumers
Building the Brand
Successful companies need to keep transforming Flexible production with better decisions for reducedcomplexity
Adoption ofproduction Strategies
Suppliers are important partners in innovation Maintaining relations with the OEMs and suppliers
Getting the prioritiesright
Improving environmental performance of products Better transparency of the whole supply network to developsustainable business
Long-term view
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CHALLENGES FACED BY AUTOMOBILE INDUSTRY
Changes in Demographics - With rising income levels, vehicles have to be designed to suit
specific requirements i.e. more configurations of products are required.
Shifts in economies - With the rise in new economic powers like China, demand patterns
have undergone a sea change with major demands from emerging economies.
Changing consumer expectations - Consumers have high expectations and are demanding
more for their money.
Rapid advancement in technology - With increasing advancement of technology, it has
become equally imperative to focus upon fuel efficiency and cost- efficacy. Thus there is a
need to strike a balance between the two.
Changes inDemographics
Shifts ineconomies
Changingconsumerexpectations
Rapidadvancement intechnology
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Increasing Complexities - more configurations in the existing products demanded has lead
to more complexities in the production and the manufacturing cycles.
Shorter technology Cycles - need to reduce the cycle times and lead times of the products
being manufactured to increase productivity and improve efficiency.
Pressure to innovate - with rising consumer expectations, imperative to innovate to serve
as points of differentiation for the new products.
Global supply networks -rapid globalisation has sparked the need to improvise the global
supply chain and delivery systems to ensure that demands are fulfilled.
Competition - stiff competition has prompted companies to offer the best package at the
best cost requiring to relook at the cost cutting strategies in turn.
Increasingcomplexities
Shortertechnology
cycles
Pressure toinnovate
Global supplynetworks
Competition
Needs Demands
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The demands of the customers, investors and regulators have clearly over weighed the
needs of the same groups. This means that these key stake holders are able to dictate the
terms to a considerable extent rather than taking what is being dished out.
AUTO INDUSTRY OUTLOOK 2014 2020 (FIVE YEAR ROADMAP)
Data from various industry reports suggest that Indian auto industry would be in the top three, after
China and the US, by 2020. The government of India in its automotive mission plan 2016, has
projected that contribution from auto industry would roughly account for ten per cent of GDP. The
market has a capability to grow at a CAGR of 6 million units of sales year on year by 2020.
Reports from various consulting firms have projected that the industry would grow to a size of 40BN
USD by the year 2016. Multinational companies including Maruti Suzuki, TATA Motors, Hyundai
Motors and M&M are likely to be the largest contributors to the industry.
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The increasing demand in the consumer and commercial vehicles would contribute to this growth,
which would be backed up by raising revenues and production capacities. The passenger vehicle
segment is expected to grow by fifteen per cent where as the commercial segment about three
percent.
In terms of sales volumes, the two wheelers are expected to contribute the highest approximating to
around 66 per cent where as in revenue terms, the heavy vehicle segment is expect to contribute
around fifty percent.
Vehicles fitted with compressed natural gas kits, and diesel vehicles are expected to occupy the
major share of the Indian auto industry in 2020. To achieve this expected position in the competitive
global market, the Indian auto industry has to undergo structural reforms and it has to align itself in
terms of innovation and product design. Along with these, sustainability and flexibility also play amajor role in defining the future outlook.
Various competitive measures influence the outlook of the growing industry. They are -
Product Leadership
With the global players foraying in Indian markets, in order to meet the goals of the next
decade (2011-2020), changing the consumer perspective towards demands such asenvironmental concerns, fuel efficiency; Innovation in designs such as introduction of hybrid
vehicles; and advancements in technology such as in engines, power trains etc would define
the strategic roadmap.
Manufacturing System Priorities
The constraints faced by manufacturers of in automobile industry in meeting the global
demands as well as to efficiently optimize technology and manpower while complaining to
eco friendly norms are the priorities which are to be considered in the future.
Performance Measures
Striking a balance between efficiency and effectiveness is always significant in attaining a
competitive position in the global markets. Maintaining the quality standards in procuring,
manufacturing, supply chain; cost effectiveness by balancing raw material, labour, inventory,
logistics; innovative and effective measures in delivering the end product to the consumer
would define the performance of the industry.
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All these measures can be defined with the help of a balance score card as below
MAJOR REGULATIONS IMPACTING THE AUTOMOBILE INDUSTRY IN THE NEXT5 YEARS:
1. NCAP crash testing
NCAP (New Car Assessment Policy) is an autonomous organisation that conducts testing of
vehicles for safety and assigns ratings to these on the basis of their performance in these
tests. Crash testing has two aspects- front impact and side impact testing. The ratings are
meant to guide the buyers in their decision making process. At present, majority of the
vehicles in India have failed the crash tests and the companies are under extreme pressure
to build safer cars complying with safety standards.
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2. Mandatory recall policyThere have been growing concerns for passenger safety which has pushed the government
to mull the option of moving from voluntary recall at present to a mandatory recall
policy. The policy as stated in the proposed road Transport and safety Bill lays down
mandatory recall on 100 or more complaints in addition attracting heavy penalty for the
manufacturer.
3. GST
Good and services taxes (GST) will positively impact the cost by eliminating the taxes such as
VAT at state level and other cascading tax structures. Under such a regime, with no taxes on
inter-state movement, companies will have greater flexibility in designing their supply chain
and also optimise logistics costs. Manufacturers can improve profitability and increase
competitiveness by passing the benefits to the consumer.
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INNOVATIONS (5 YEAR ROADMAP):
1. Hybrid vehiclesIt couples an electric motor with an internal combustion engine. The system balancesbetween the electric motor and the IC engine depending on the driving conditions. The
motor gets charged and can be used in tandem.
2. Electric vehiclesPlug-in electric vehicles offer low cost running solutions. Government subsidies to promoteelectric vehicles are not adequate in the absence of electricity charging stations.
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3. Lane departure warning systemsLane changing is one of the dangerous events while driving and this system alerts the driverin case a car is already in the lane that the driver is intending to switch to.
4. AMT gearboxA revolutionary gearbox that combines the robustness and efficiency of a manual gearboxwith the driving comforts of an automatic transmission gearbox.
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5. Sensor based wipers and headlightsSenses the rain and darkness conditions and automatically turns ON the wipers andheadlights respectively assisting the driver and ensuring safety.
6. Turning HeadlampsOn turnings, this system traces the direction of the vehicle increasing the field of view/enhancing visibility of the driver and ensuring safety.
7. Parking sensors and CamerasHelps the driver to get a clear LIVE picture of the rear and assists in parking the vehicle. Alsosome models like the Volkswagen Phaeton have systems that can park the vehiclesthemselves without any driver effort.
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8. Regenerative braking systemsDuring braking and idling condition, this system stores the kinetic energy by means of akinetic energy recovery system (KERS). The stored energy can be utilised to power thevehicle at later stages.
INNOVATIONS - AUTOMOBILE SECTOR (15 Year Road Map):
S.No. Innovations Description
1. Incremental innovation making the existing systems more efficient and more cost- effective2. Process innovation implementing a better production and delivery system
3. Service innovation new service concept or service delivery system channel
4. Business model innovation aligning resources and processes to create value proposition
5. Sustainable innovation products and processes contributing to sustainable development
6. Frugal innovation strategies to do more with less
7. Radical innovation eliminating the conventional and providing new breakthroughs
8. Experience innovation consumer engagement through holistic experiences9. Supply chain innovation technological innovations to the supply chain in order to reduce
cycle and wait times and implementation of Lean methods
( reducing wastes)
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THE FUTURE OF AUTOMOBILE INDUSTRY (15 YEAR ROADMAP)
In the next 15 years, technological advancements would play a major role in driving the automobilesector. The industry would move from labour intensive to technology driven manufacturing. Below
are the various key drivers which will impact the auto industry in the next 15 years.
1. Big Data
Vast new avenues for reducing costs and generating new revenue streams can be made
possible by Big Data Technologies. The leverage is from the patterns that we generate from
the collected data. Immense opportunities beckon us. Big data can aid to accelerate sales
such that instead of waiting for customers, they can be identified on the basis of their online
behaviour. Correlating factors can be identified that influence a persons buy ing behaviour.
2. Mobility
The next big platform for application developers is certainly Cars. Mobility plays a huge role
in influencing the customer expectations and preferences. Mobile platforms are used as
tools for communication, navigation/search and entertainment. Every smart phone can be
used effectively to work as a sensor reporting the position of the car, the speed and
numerous other details about the same. This can be leveraged upon to scan the
environment and gather data about the surrounding devices or the networks.
IT has brought about a sea change in the way automobile manufacturers manage their
manufacturing operations and the associated costs. Cloud computing is touted as the next
big thing. The launch of a new car can spark desires from the customers to customise/
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configure their car and cloud computing can help in sales mobilization process. A public
cloud can be used for the process. This translates to cash retaining that can be served for
better.
3. Cars that communicate with each other and the road
This is perceived as one of the major break-through as far safety in automobiles is
concerned. Through this system, cars can communicate exactly their position, speed and thedirection. Consider a case where a car ahead has just put on the brakes and you havent
noticed the same continuing at the same speed as before. The system in that case will
immediately gather wireless signals transmitted by the car ahead and ensure warning signals
to the driver to apply brakes or actuate an automated braking system. Ford, Volvo and
Scania are some of the renowned companies to have taken a proactive step. This system is
named the V2V or vehicle to vehicle. Estimates have shown that accidents can be reduced
by 79% by the implementation of this system. Apart from the V2V, V2I or the vehicle to
infrastructure can help prevent collisions with buildings and other infrastructure. The
implementation of both the systems in the automobile can reduce accident chances by 81%.
The need of the hour is close coordination with the government and the research and
development agencies.
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4. Self-driving Cars
Self-driving cars have always been showcased in sci-fi flicks. Nevertheless, it is the next big
thing to make way into the automobile market. With Google having tested its version of
self-driving car for more than 200,000 miles of public highways and roads. How do they do it
is by recording images of the roads through cameras. Through integrated systems
comprising of radars, cameras and lasers, these cars know about the best routes available,
have a track of the road signs and can process information faster than a human being can
do. The self-driving cars can help people utilise the idle time or time wasted during traffic
jams. A new concept of platooning has emerged in this regard. It is the phenomenon inwhich cars stuck in a traffic jam drive close to each other thus forming and acting as a unit.
This is possible because the cars are continuously interacting and communication with each
other. Such a system enhances the safety of the automobiles by eliminating the cause of
95% of accidents that is human error.
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5. Augmented reality dashboards
GPS and integrated infotainment systems have made their way into automobiles. However,
an advanced feature is the augmented reality dashboard also known as the AR dashboard.
What it simply aims to do is to display all the information on the windscreen in front of the
driver. The system collects information from the obstacles ahead and transmits the same
onto the screen. BMW has already utilised the system that displays basic information. The
AR system additionally displays information about the obstacles or vehicles ahead and
flashes images of the same with adequate warning lights and also indicators as to the lane in
which the car ought to shift to avoid a collision. Thus it is an enhanced safety feature
employed. Toyota is inventing with a somewhat similar system wherein the technicians wear
an AR Glasses and look at the engine. All the defects are identified and transmitted onto the
screen making it easier for the technician to carry out the repairs.
6. Airbags that help stop cars
Airbags are a commonly available safety feature available on automobiles with variations as
side airbags, front airbags and configurations based on the number of airbags deployed.
However, the future might see the deployment of airbags from underneath the cars, an
innovation being pursued hard by Mercedes. The move is to make airbags a part of the
active safety system rather than a passive safety system it has been by far. In the event of an
inevitable collision as calculated by the safety system, the system deploys airbags from
beneath the automobile. The airbags with special friction coating help in stopping the car at
double the rate. Also the airbag is supposed to lift the car by up to 8 centimetres which is
aimed to prevent the forward tilting of the car and have bumper-to-bumper contact to
minimise wreckage.
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7. Energy storing panels
By 2040, it is predicted that half of the new cars being produced will be hybrid cars. One of
the problems typically associated with hybrid vehicles is the high space and weight
requirements of the batteries. Advancement with lithium-ion batteries has nevertheless
kept the problems of weight and space up to a considerable extent. The energy-storing body
panels seem to be the panacea. Currently being experimented aggressively in Europe by 9
major automobile manufacturers, these panels are expected to store energy and charge
faster than the conventional batteries. Polymer fibre and carbon resin with adequatestrength and easy moulding as panels are to be used for the same. Also these panels can
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reduce the weight by up to 15%. So, with enormous storing and charging potential, these
can also reduce the wastage in energy from elimination of the extra weight to be moved.
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CONCLUSION
This project provided us with an immense opportunity to learn as well as apply the various concepts
of Operations Management. By understanding the principles and applications of Operations
management in the Automobile industry, we were able to develop a Roadmap of the developments
and innovations for the next 5 as well as 15 years. We attempted the project systematically so as to
gauge the situation from scratch and thus build the most apt scenarios possible. The project starts
with a comprehensive analysis of the automobile industry in India and draws useful parallels with
emerging economic superpowers like China. This is particularly useful in the gap analysis and
searching for solutions to plug the same. The development of scenario based planning takes wings
with the definition of scope that is to emerge as the largest automobile manufacturer of the World.
This is followed by SWOT analysis which gives a better image about the present state and what the
future beholds for the industry. Next by analysing the perceptions, three main objectives are
fulfilled- identifying the factors involved which could influence the future of the industry, identifying
the impact and uncertainty of these individual factors on the Indian auto industry and finally
benchmarking the perspectives of various stakeholders who are involved in the scenario building
process. The factors are plotted on a graph with uncertainty on x-axis and impact on y-axis to create
the uncertainty- impact matrix. Accordingly, 4 scenarios are created with key variables being
technology, market concentration and geopolitical policies of the government. Finally the strategy isformulated and the project is replete with balanced score card, strategic road maps for the next 5
and 15 years thus giving a comprehensive scenario based planning and developing roadmaps for the
automobile industry in India. This project has been an immense learning curve in our understanding
of Operations Management.
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REFERENCES / BIBLIOGRAPHY
Crisil Research Databasehttps://www.crisilresearch.com/
India Automotive Manufacturing report by MarketLinehttp://advantage.marketline.com/Product?pid=MLIP1398-0012
Online Proquest Journalshttp://search.proquest.com/?accountid=49732
Innovation in Manufacturing a report by KPMG Indiahttp://www.nicct.nl/file.php?nr=45&code=9ae44601e53e4529e2338148823b92ae
Perspective of Strategy By Torsten Wulf, Philip Meiner, Stephan Stubner
https://www.crisilresearch.com/https://www.crisilresearch.com/http://advantage.marketline.com/Product?pid=MLIP1398-0012http://advantage.marketline.com/Product?pid=MLIP1398-0012http://search.proquest.com/?accountid=49732http://search.proquest.com/?accountid=49732http://www.nicct.nl/file.php?nr=45&code=9ae44601e53e4529e2338148823b92aehttp://www.nicct.nl/file.php?nr=45&code=9ae44601e53e4529e2338148823b92aehttp://www.nicct.nl/file.php?nr=45&code=9ae44601e53e4529e2338148823b92aehttp://search.proquest.com/?accountid=49732http://advantage.marketline.com/Product?pid=MLIP1398-0012https://www.crisilresearch.com/