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Chapter - 1
Chapter - 1
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
In today’s highly competitive, dynamic and technology driven business circumstances,
marketers are under steady pressure to deliver the best. Organizations are continuously
improving and upgrading themselves to meet customer expectations and demands.
Technology has not only changed the way in which business is done in modern times but
has also transformed the way to reach out to target audience. Marketers have identified
most recent media options to communicate and convince potential customers. Numerous
scholars have studied the research domain of advertising and have tried to recognize
different measures of advertisement effectiveness in context of various media.
The project report comprises of six chapters accomplishing the mission of the study.
Chapter 1: Introduction
2.2 ADVERTISING
According to Roshni.P. Sawant (2012) advertisements have a great role in creating brand
awareness. Further advertising also helps in improving brand recognition. The advertising
message is also said to be influential in building brand awareness. `
“Advertising presents the most persuasive selling message to the right prospects for a
product or service at the least possible cost.”- The UK Institute of Practitioners in
Advertising (adapted from Dogudje 2009).
“Advertise or die” were the words of Kankarofi, the APCON Registrar in a paper he
recently presented on Options for Corporate Survival: a seminar organized in Lagos by the
Nigeria South Africa Chamber of Commerce. He emphasized on the need for
corporate/business organizations to sufficiently appreciate the place of advertisement in
the survival of their business.
In the words of Kaufman (1980:3), “advertising is not chemistry, with rules and laws that,
if followed with reasonable precision, will lead to predictable results every time.
Advertising is not a panacea that can restore a poor product or rejuvenate a declining
market; it is not a substitute for sound business judgment nor is advertising merely the
words and pictures that appear in newspapers and magazines, on billboards and on
television screens. These are the means or the media that advertising uses to communicate
its information about products, services, and ideas to people: information designed to
persuade them make buying or action decisions. Advertising is the art and business of
persuasive communication”.
Nwaizugbo (2004:181) defines advertising as a process of presenting a product or idea to
a person or group of persons, some openly sponsored message (oral or visual) about a
product or seller. This message which is being presented is known as advertising.
Jefkins (1985:3) submitted that advertising is the means by which we make known what
we have to sell or what we want to buy.
Whereas, Kotler & Armstrong (2007:426) see advertising as any paid form of non-personal
presentation and promotion of ideas, goods, or services by an identified sponsor.
Above all, the American Marketing Association (AMA) recommends this definition:-
Advertising is any paid form of non-personal presentation and promotion of ideas, goods,
and services by an identified sponsor. In this definition, the following phrases were further
explained.
Paid Form: When products or services are mentioned favorably in the media, the item
appears because it is presumed to provide information or entertainment for the audience.
This is called publicity, and no payment is made by the benefited organization. Advertising
on the other hand is published or broadcast because the advertiser has purchased time or
space to tell the story of a certain product or service.
Ideas, Goods and Services: From this phrase, it’s obvious that advertising is not all about
promotion of tangible goods as other service providing organizations such as banks,
Insurance companies, Airlines etc also advertise as aggressively as do other manufacturers
of tangible goods.
An Identified Sponsor: This phrase states that advertising must disclose or identify the
source of opinions and ideas it presents.
4. Adding value: Given that there are three major ways a company can add value to its
offerings, viz: Innovation, quality improvement and alteration of consumer perceptions;
advertising adds value to brands by influencing consumers’ perceptions. Effective
advertising causes brand to be viewed as more elegant, more stylish, more prestigious and
probably superior to competitors’ offerings.
5. Assisting other company efforts: Advertising can be viewed as one member of the
marketing communications tools. Terence (2000:264) puts it this way, “Advertising is at
times a scorer that accomplishes goals itself. At other times, advertising’s primary role is
as an assister that facilitates other company efforts in the marketing communications
process
Increase profit thereby ensuring the continued life of the business
Increase turnover
Induce higher production volume resulting from increase in demand
Get more efficient in the utilization of resources as a result of increase in profitability
Invest in research and development
Expansion of market share.
Print Advertising:- All forms of copy work including non-audio visuals such as
newspapers, magazines, posters, calendars etc. This form of advertising can further be
grouped into:
Consumer advertising: this occurs when the producer tries to reach and influence
through the advertising mediums.
Trade advertising: Producers can direct consumer goods towards retailers and
wholesalers. In this form, the producer seeks the attention and patronage of
supermarkets, hardware stores, specialty stores and small business people. The
intent of this form of advertising is for those outlets to stock and promote the sale
of a particular brand. Users are expected to make purchase from these outlets. The
product could be promoted under the stores brand name.
Public Relations Advertising (Institutional advertising): Producers sometimes use
advertising to promote their public relations objectives.
Lavidge and Steiner (1961) proposed that the way to evaluate advertising effectiveness is
sale effect and communication effect. The sale effect of advertising is to sell product sales
as a measurement, but advertising is just one of the reasons to affect safe effect. Moreover,
the communication effect is to see how an advertising message to be noticed, understood,
accepted, and the level of an attitude generated by a product or changed by a behavior.
Lavidge and Steiner (1961) also mentioned the hierarchy of effect models in responding to
the advertising effectiveness work. Therefore, if advertising can make advertisers
effectively catch the message in order to reach the purpose of communication. In this study,
the advertising result is the communication effect of advertising.
Impact of Advertising
Uchenna Cyril Eze and Chai Har Lee (2012) advocates that there is a positive impact of
product information on advertisement and also the attitude levels shown by the customers.
Other factors such as economic situations, materialism we influential in positive attitude
toward advertisement’s. The economic condition had a direct relation toward customer
attitudes toward advertising. This is also said to differ among societies. This economic
impact of advertising on the societies is also a factor in measuring advertising
effectiveness.
From an advertisement media perspective, Television advertisements were said to one of
the most effective tools for advertisements. Celebrity Endorsement was found out to be
another major factor influencing the effectiveness of advertising R. Indumathy (2012).
Ying-Fang Lai, Chien-Yuan Lai and Hsiu-Sen Chiang (2014) have presented that when the
advertisements have a better relation to the product the customers are said to be more
involved to the advertisement. Therefore, level of influence can be termed as a major factor
in advertising effectiveness. Also higher involvement advertisements lead to higher
involvement in the purchase intention.
Macarena Estévez (2011) state that recall, brand recognition and buying intention were
seen as the major factors for studying about advertisement effectiveness, in the study these
factors were analyzed as a 3D effectiveness scale. Improving the above three factors were
said to be influential in improving the effectiveness of advertisement’s.
According to Moriarty, Mitchell and Wells (2009) media planning involves the challenge
of advertising practitioners in determining the best way to deliver a message to the target.
They explain that four advertising professionals are involved in the media planning
process. These are media researchers, media planners, media buyers and media buying
companies.
As identified by Francis A (2011) the criteria for selecting media for any advertising
campaign include the nature of the product, market, advertising objectives, media
circulation, financial consideration, type of audience, life of advertisement and media used
by competitors. Others include target audience media habits, nature of the product, type of
advertising message, cost factor, media reach, available budget, prestige and image of the
media as well as media rating and share.
Herbigand Milewicz (1995) suggested that credibility is related to the extent to which, what
is said matches with what is done. In other words, if the product claims confirm with the
performance, the credibility increases.
Kotler (2006) explains that celebrity endorsement is a particular strategy used by marketers
to advertise a product from such a platform through which consumers can associate
themselves with the brand value from the perspective of the celebrity personnel. In India a
celebrity idolizes in the mind of the consumer so large that any activity can be capitalized
on their huge fan followers (Erdogan,1999).
Celebrity advertising for companies has become a trend and a perceived winning formula
of corporate image building and product marketing. Brands have become embedded in the
consumer psyche and offer consumers the opportunity for self-expression, self-realization
and self-identity. Celebrity endorsement is recognized as a potentially potent tool in
communications, with celebrities viewed as more powerful than anonymous models and
campaigns tending to verbalize the meaning of the celebrity in relation to the brand (Brian
Moeran, 2003).
To the manufacturer ,brands offer a means of identification, legal protection and the ability
to be distinctive. In addition, branding is a sign of quality and can be used to secure
competitive advantage and increased financial returns and high customer loyalty. For the
consumer, the brand functions as a means of identification, reduces search costs, effort and
perceived risk, thereby facilitating in decision making, and represents a guarantee of
quality and reliability. Customer perceptions about celebrity endorsement have been of big
interest by researchers in past several years. The results of previous studies showed that
the highest benefit of involving celebrities in advertising is to create exposure and attention
from consumers.
Particularly differences and similarities are present in the impact of celebrity endorsements
and how consumers perceive them. While there is a positive impact of celebrity
endorsements on attention and exposure of consumers, its connection to positive attitudes
towards brands and purchase decision is less understandable (Biswas, Hussain, &
O‘Donnell, 2009).
Berkman and Gilson (1987) defined advertising appeal as an attempt at creativity that
inspires consumers’ motives for purchase and affects consumers’ attitude towards a
specific product or service. Schiffman and Kanuk (2007) defined advertising appeal as
suppliers’ application of a psychologically motivating power to arouse consumers’.
Hence, advertising appeal is applied to attract the consumers’ attention, to change the
consumers’ concept of the product, and to affect them emotionally about a specific product
or service (Belch and Belch, 1998; Schiffman and Kanuk, 2007). =
To meet the varying demands of their target consumers, advertisers commonly use rational
appeal and emotional appeal in their advertising in an attempt to influence consumer
behavior (Chu, 1996). By rational advertising appeal, the product can be emphasized by its
benefits, in which the consumers’ self-benefit is the key proposition, and the function or
benefit requested by consumers of the product or service is a rticulately presented in
advertising.
On the other hand, emotional advertising appeal places stress on meeting consumers’
psychological, social, or symbolic requirements, where many purchase motives come from.
Kotler (1991) defined rational appeal as rationally oriented purchase stimulated by directly
giving explanations of a product’s advantages. Rational appeal focuses on the benefits
consumers may enjoy. In an advertisement, it emphasize that a product or service could
achieve the function and benefits consumers desire. He defined emotional appeal as the
stimulation of consumers’ purchase intentions by arousing their positive or negative
emotions. Positive emotional appeal covers humor, love, happiness, etc, while negative
emotional appeal involves fear, a sense of guilt, and so on.
Attitude is an essential concept in psychology, but it is also widely applied in the social
sciences and marketing. Fishbein and Ajzen (1975) defined attitude as a learning
orientation based on which a state of constant like or dislike is generated towards a certain
object.
Lin (2008) defined advertising attitude as a continuously reactive orientation learned from
a certain object. Such an orientation represents an individual’s personal standards such as
like and dislike, and right and wrong. The attitude held by consumers caused by advertising
can be classified into two components: cognition and affection. Cognition and affection
stand for thinking and feeling, respectively (Vakratsas and Ambler, 1999).
Allport (1935) pointed out that the difference between the two components lies in that
cognition stands for an individual evaluation towards external stimulation, while affection
reflects an individual’s internal feelings.
Dahlqvist and Linde (2002), presents an in-depth analysis of the role consumer behaviour
plays in the buying decision of consumers by discussing four factors. These factors are
presented in the table below:
1. Problem Recognition: The buying process consists of five steps which the
consumer undergoes as shown in figure. The decision is made to solve a problem of any
kind or satisfy a need. The problem recognition occurs when a consumer identifies a need
or a problem and the need is prompted either by an external (example: advertisement,
friend’s purchases) or internal (example: hunger, fear, stress) stimulus. For example a
smoker feels stressed out from work of studies and realizes the need to smoke to calm his
or her nerves. The problem recognition stage is where the consumer experiences a state of
felt deprivation (need) or wants. According to Nwaizugbo (2004:84), a problem stage is
when the consumer feels an imbalance between his actual state and desired state. In this
case, a need had arisen to be satisfied, which must be properly identified to avoid wrong
decision making.
2. Information Search: Once the Consumer has recognized a problem, the next stage
is to search for information in order to solve the problem. Here, the consumer seeks
information on which brand that can solve the recognized problem. At this stage, he may
be faced with various brands which he evaluates for the purpose of selecting the best. In
the evaluation process, he considers factors like, prices, qualities etc, as well as the extent
to which the product can solve the need. The information can be gathered from different
sources such as commercial source (example: advertisement, salespersons), personal
source (friends and family), experiential source (such as using the product) and public
source.
4. Purchase decision: After evaluating the alternative brands and selecting the best,
the Consumer is now ready to make a purchase. It’s however, noteworthy that sometimes,
purchase intention does not result in an actual purchase. This is where the role of the
organization in facilitating the consumer to act his purchase intention becomes very
necessary. The consumer would select the most important information, weigh the benefits
of each product and decides either to purchase a particular product or not, postpone the
purchase or even not purchase at all. Income, attitude of others or perceived risk can
influence the purchasing decision.
Differences in consumers buying behaviour depends on the type of product the consumer
is purchasing. A behaviour model consisting of four different buying behaviours was
designed by Kotler et al (1999)
Complex buying occurs when there is high involvement from the consumer to a product
and significant differences between the brands. This means that before a consumer
purchase a high quality brand, he searches for a lot of information about that brand.
Variety-seeking behavior is the case where the individual likes to shop around and
experiment with different products. In other words, an individual may shop around for
different breakfast cereals because he wants variety in the mornings.
Habitual buying behavior is where the individual buys a product out of habit e.g. a daily
newspaper, sugar or salt. Cigarette smokers can be classified as having a habitual buying
behavior because there is perceived little difference between existing cigarette brand
manufacturers.
Baker (1996) noted that price is the mechanism which ensures that the two forces (demand
and supply) are in equilibrium. According to Santon (1981) price is simply an offer or an
experiment to task the pulse of the market. It is the monetary value for which the seller is
willing to exchange for an item (Agbonifoh et al, 1998).
Ezeudu (2004) argues that price is the exchange value of goods and services. Schewe
(1987) defines price as what one gives up in exchange for a product or service. It is one of
the most important elements of the marketing mix as it is the only one that generates
revenue for the firm unlike the others that consume funds (Agwu and Carter 2014).
Lovelock (1996) suggested that pricing is the only element of the marketing mix that
produces revenues for the firm, while all the others are related to expenses.
Diamantopoulos (1991) also argued that, ―price is the most flexible element of marketing
strategy in that pricing decisions can be implemented relatively quickly in comparison with
the other elements of marketing strategy. It is capable of determining a firm‘s market share
and profitability.
Kellogg et al., (1997 p.210) point out: ―If effective product development, promotion and
distribution sow the seeds of business success, effective pricing is the harvest. Although
effective pricing can never compensate for poor execution of the first three elements,
ineffective pricing can surely prevent those efforts from resulting in financial success‘‘.
Typically, pricing strategies that are investigated in the marketing literature consist of
analyzing aggregated prices (Tellis 1986).
Bertini and Gourville (2012) stressed that businesses should look beyond the mechanics of
just fixing prices they feel is suitable for a product having estimated cost and profit still
relevant but no longer sufficient and recognize that harmonization of the way they generate
revenue can open up opportunities to create additional value. This study therefore has dual
purposes which are to assess the effect of pricing strategies on the purchase of consumer
goods and how the advent of online pricing interferes in the above.
2.4.7 Studies on information search
“The information may be reasonably considered a primitive concept, as are energy,
electricity, distance, power, and work. One understands each of them intuitively, but there
are no adequate definitions for them. Their lack of precise definition has not prevented men
and women from studying their properties, behaviours, and interrelationships within
systems and organizations” (Pao, 1989).
Belkin is “not concerned with definitions of information, but rather with concepts
ofinformation. The distinction is that a definition presumably says what a phenomenon
defined is, whereas a concept is always of looking at, or interpreting the phenomenon. By
accepting the idea of a concept, one becomes free to look for a useful concept rather than
a universally true definition of information” (Belkin, 1978).
“While information needs may be influenced by factors relating to the individual as above,
there are also other more general characteristics of 125 information needs that enter into
the equation. Two examples of these general factors are frequency and complexity”
(Bresnick, 1988).
Information Need The “information need” is another term that has been discussed and
approached from many different perspectives. Much of the discussion has been orientated
towards the clarification of other related concepts such as “wants”, “requests”, “demands”,
and so on. “Information need is a term closely related to the concept of information seeking
behavior. A user recognizing an information need, articulates it into a question, or, request
which is conveyed through formal or/and informal channels of communication and
information systems, in order to receive a response (verbal written, visual) which will
satisfy that need. The decisions concerning which communication channels and
information systems will be used, as well as in which way and how they constitute the
information seeking behavior of a user. Due to the existence of many internal factors that
are concerned with the individual user, the examination of the information seeking
behavior becomes very difficult and complicated” (Siatri, 1999).
Leuplot pointed out that the information requirements are more or less adequate reflection
ofthe information need and the need to satisfy it. “Information needs and information
requirements are mutually interdependent and the requirement is the reflection ofthe
objectively existing information need. Further the relation between information need and
information requirement is to be seen 126 in the light ofthe fact for satisfying the
information needs. It is necessary to meet the information requirements corresponding to
that information need” (Leuplot, 1983).
For McGarry need is the basic concept of information studies but it is difficult to define it
precisely and accurately. However, it implies lack of something which, if given would
enhance our welfare or make easier the attainment of whatever objectives we may have in
mind. “The concept needs can be known through the various terms such as want (a state or
fact of being without or having an insufficient, absence or deficiency of necessities), desire
(an unsatisfied longing or craving), demand (to require, asking for what is due or asking
for something), and requirement (a need, a thing needed, necessary condition)”.
Atkin has beautifully defined the term “information need” that “a function of extrinsic
uncertainty produced by a perceived discrepancy between the individual’s current level of
certainty about important environmental objects and a criterion state that he seeks to
achieve”. Information Seeking Behaviour “Information seeking is a human process that
requires adaptive and reflective control over the afferent and efferent actions of the
information seeker.
Information seeking behavior (ISB) resulted from the recognition of some needs, perceived
by the user, who as a consequence makes demand upon on formal system such as libraries
and information centres, or some other person in order to satisfy the perceived information
need. The information seeking behavior 127 essentially refers to locate discrete knowledge
elements. It is concerned with the interactive utilization ofthe three basic resources namely,
people, information and system. Further in order, to satisfy the information needs, the user
actively undergoes the information seeking process. The attempt ofthe user in obtaining
the needed information results from the recognition of some needs, perceived by the user”
(Singh & Satija, 2006).
“Advertising presents the most persuasive selling message to the right prospects for a
product or service at the least possible cost.”- The UK Institute of Practitioners in
Advertising (adapted from Dogudje 2009).
“Advertise or die” were the words of Kankarofi, the APCON Registrar in a paper he
recently presented on Options for Corporate Survival: a seminar organized in Lagos by the
Nigeria South Africa Chamber of Commerce. He emphasized on the need for
corporate/business organizations to sufficiently appreciate the place of advertisement in
the survival of their business.
In the words of Kaufman (1980:3), “advertising is not chemistry, with rules and laws that,
if followed with reasonable precision, will lead to predictable results every time.
Advertising is not a panacea that can restore a poor product or rejuvenate a declining
market; it is not a substitute for sound business judgment nor is advertising merely the
words and pictures that appear in newspapers and magazines, on billboards and on
television screens. These are the means or the media that advertising uses to communicate
its information about products, services, and ideas to people: information designed to
persuade them make buying or action decisions. Advertising is the art and business of
persuasive communication”.
Jefkins (1985:3) submitted that advertising is the means by which we make known what
we have to sell or what we want to buy.
Whereas, Kotler & Armstrong (2007:426) see advertising as any paid form of non-personal
presentation and promotion of ideas, goods, or services by an identified sponsor.
Wright, Winter & Zeigler (1983:8) see advertising as a powerful communication force and
a vital marketing tool, helping to sell goods, services, images and ideas (or ideals) through
channels of information and persuasion. By this definition, it’s noteworthy that advertising
never sells products but helps to sell products.
Swatch also used a range of unusual product forms to successfully stand out in the market
for wristwatches (Bloch 1995). With new product offerings, a distinctive design may force
competing designs to become obsolete and may help a company gain advantage in
competing with the new competitors, since the newly designed products will catch the
consumers’ attention easier (Midgley 1977 in Bloch 1995).
According to Car Magazine Online, Ford revealed its new design philosophy: “Kinetic
Design”, the successor of “Edge Design”, in 2008. New philosophy drew immediate
attention of consumers with its distinctive product appearance, and changed the aesthetic
values in automotive industry, which forced existing brands to develop new design
philosophies to compete.
(Dade) 1994 P.3 Or it’s the characteristics and specifications of a product or a service that
generates the ability to fill explicit and implied needs Quality is reaching the gap between
the consumers’ expectations for the product’s quality and their realization of the actual
performance of that product.
(Evans) 1997 sees quality as the mark for using any product or service that has to meet the
consumers’ expectations.
(Heazer & render ) 2001 Many researchers addressed the concept of quality defined quality
as the overall characteristics of a product (service or a ware) that shows and reflect the
product’s capacity to fulfill explicit and ismplied needs.
Muhammed Ashioni) 2005 Quality is the constant development of the product the meet up
with the consumer needs with the least costs (Basics on total quality control & total quality
management.
(Hoffman, Bateson) 2011, p:4 Quality is a standard of correspondence between the actual
performance of the service with the customers’ expectations or the difference between the
customers’ expectations and their realization of the service’s actual performance.
Chapter -3
Industry and Organization profile
3.1 Automobile Industry
In the automobile sector, customer centricity is the hallmark of good business. Constantly
learning from contemporary trends and evolving consumer expectations is obliging. After-
sales services provided by an automaker has now become a key factor in the consumer’s
buying decision, thereby playing a critical role in creating new benchmarks, and bringing
the brand closer to its customers.
Around the world, there were about 806 million cars and light trucks on the road in 2007,
consuming over 980 billion litres (980,000,000 m3) of gasoline and diesel fuel yearly. The
automobile is a primary mode of transportation for many developed economies. The
Detroit branch of Boston Consulting Group predicts that, by 2014, one-third of world
demand will be in the four BRIC markets (Brazil, Russia, India and China). Meanwhile, in
the developed countries, the automotive industry has slowed down.
It is also expected that this trend will continue, especially as the younger generations of
people (in highly urbanized countries) no longer want to own a car anymore, and prefer
other modes of transport. Other potentially powerful automotive markets
are Iran and Indonesia. Emerging auto markets already buy more cars than established
markets. According to a J.D. Power study, emerging markets accounted for 51 percent of
the global light-vehicle sales in 2010. The study, performed in 2010 expected this trend to
accelerate. However, more recent reports (2012) confirmed the opposite; namely that the
automotive industry was slowing down even in BRIC countries. In the United States,
vehicle sales peaked in 2000, at 17.8 million units.
One bad after-sales service experience can drive them away to competitive brands.
Therefore, it clearly is an instrumental component to retain existing customers and explore
potential ones. Like a glue that keeps customer relationships intact. Customers also aims
to have a long association with brands they use, thus shifting the limelight on after-sales
service. Owing to busy schedules and changed lifestyles, consumers are reluctant to follow
the same format. They expect manufacturers to offer services including a pick and drop,
with a turnaround time of less than 24 hours. To gain a competitive edge and yield positive
sales in the industry, automakers could look at moving up the ladder from customer delight
to customer engagement.
In the Traveller range of vehicles, passenger travellers have been a solid performer in the
segment. Tourist and Travels swear by the comfort it offers and School Bus operators value
it for its economical running cost and therefore it has become the LCV to beat. All others
LCVs pose a threat to the Force Motors.
Employment
The automotive industry in India has been on a growth trajectory with impressive spikes in
sales, production, and exports over the last two years. With an average production of
around 24 million vehicles, annually and employer of over 29 million people (direct and
indirect employment), the automotive sector in India is one of the largest in the world. India
is the largest tractor manufacturer, 2nd largest two- wheeler manufacturer, 2nd largest bus
manufacturer, 5th largest heavy truck manufacturer, 6th largest car manufacturer and 8th
largest commercial vehicle manufacturer. For every vehicle produced, direct and indirect
employment opportunities are created with employment of 13 persons for each truck, 6
persons for each car and 4 for each three- wheeler and one person for two-wheelers. The
$ 93 billion automotive industry contributes 7.1% to India‘s GDP and almost 49% to the
nation‘s total manufacturing GDP (FY 2017-18). As the automotive sector as a major
employment generator, GDP contributor and FDI earner, the automotive, industry is
instrumental in shaping the country‘s economy and hence regarded as a 'Sunrise sector'
under, Make in India. In order to further promote the sector, initiatives are being
undertaken by the Government of India to promote innovation and R&D and create a
favourable policy regime to make India a prominent manufacturing destination.
Growth
According to the data released by Society Of Indian Automobile Manufacturers (SIAM),
the Indian automotive industry produced a total of 26,402, 671 vehicles including the
passenger vehicles, commercial vehicles, three-wheeler, two-wheeler in April-February
2018 as against 23,078,120 in April-February 2017, registering a growth of 14.41 per cent
over the same period last year. The overall industry registered positive sales figures in the
period while the commercial vehicles, three-wheeler, two-wheeler industry saw double
digit growth in the domestic market compared to sales in April-February 2017.The sale of
passenger vehicles grew by 8.04 per cent in April-February 2018 over the same period last
year. Within the passenger vehicles, passenger cars, utility vehicles and vans grew by 3.62
per cent, 21.34 per cent and 4.25 per cent respectively in April-February 2018 over the
same period last year. The over commercial vehicle segment grew by 19.30 per cent April-
February 2018 as compared to the same period last year. The Medium and Heavy
Commercial Vehicles (M&HCV) grew by 11.91 per cent and light commercial vehicles
grew by 24.64 per cent in April-February 2018 over the same period last year. The three-
wheeler segment saw a growth of 19.11 per cent April-February 2018 over April-February
2017. Within the three-wheeler segment, Passenger Carriers and Goods Carrier sales
registered a growth of 22.36 per cent and 6.80 per cent in April-February 2018 over the
same period last year.
Automobile exports from India increased 15.81 per cent year-on-year in April-
February 2017-18. During the same period, two and three-wheelers exports increased
20.30 per cent and 37.02 per cent, respectively.
Prospect To Export
India is also a prominent auto exporter and has strong export growth expectations for the
near future. In April-March 2017, overall automobile exports grew by 1.91 per cent. PV,
Commercial Vehicles (CV), and Two Wheelers (2W) registered a growth of 5.24 per cent,
16.97 per cent, and 0.97 per cent respectively in April-March 2016 over April-March
2017.* In addition, several initiatives by the Government of India and the major automobile
players in the Indian market are expected to make India a leader in the 2W and Four
Wheeler (4W) market in the world by 2020 (ACMA, 2015).
Market Size
Overall domestic automobiles sales increased at 7.01 per cent CAGR between FY13-18
with 24.97 million vehicles getting sold in FY18.The auto industry is set to witness major
changes in the form of electric vehicles (EVs), shared mobility, Bharat Stage-VI emission
and safety norms. Electric cars in India are expected to get new green number plates and
may also get free parking for three years along with toll waivers. Sales of electric two-
wheelers are estimated to have crossed 55,000 vehicles in 2017-18. Premium motorbike
sales in India crossed one million units in FY18.
Investments
In order to keep up with the growing demand, several auto makers have started investing
heavily in various segments of the industry during the last few months. The industry has
attracted Foreign Direct Investment (FDI) worth US$ 18.413 billion during the period April
2000 to December 2017, according to data released by Department of Industrial Policy and
Promotion (DIPP).Some of the recent/planned investments and developments in the
automobile sector in India are as follows:
Ashok Leyland has planned a capital expenditure of Rs 1,000 crore (US$ 155.20
million) to launch 20-25 new models across various commercial vehicle categories in
2018-19.
Government Initiatives
The Government of India encourages foreign investment in the automobile sector and
allows 100 per cent FDI under the automatic route. Some of the recent initiatives taken by
the Government of India are -
Energy Efficiency Services Limited (EESL), under Ministry for Power and New and
Renewable Energy, Government of India, is planning to procure 10,000 e-vehicles via
demand aggregation, and has already awarded contracts to Tata Motors Ltd for 250 e-
cars and to Mahindra and Mahindra for 150 e-cars.
History
Maruti was established in February 1981 with production starting in 1983 with the Maruti
800, based on the Suzuki Alto car. As of May 2007, the Government of India, through
Ministry of Disinvestment, sold its complete share to Indian financial institutions and no
longer has any stake in Maruti Udyog.
Maruti Suzuki
Type Public
NSE: MARUTI
Industry Automotive
Market liberalization
In 1989, the Maruti 1000 was introduced and the 970 cc, three-box was India's first
contemporary sedan. By 1991, 65 per cent of the components, for all vehicles produced,
were indigenized. After liberalization of the Indian economy in 1991, Suzuki increased its
stake in Maruti to 50 per cent, making the company a 50-50 JV with the Government of
India the other stake holder.
In 1993, the Zen, a 993 cc, hatchback was launched and in 1994 the 1298 cc Esteem was
introduced. Maruti produced its 1 millionth vehicle since the commencement of production
in 1994. Maruti's second plant was opened with annual capacity reaching 200,000 units.
Maruti launched a 24-hour emergency on-road vehicle service. In 1998, the new Maruti
800 was released, the first change in design since 1986. Zen D, a 1527 cc diesel hatchback
and Maruti's first diesel vehicle and a redesigned Omni were introduced. In 1999, the
1.6 litre Maruti Baleno three-box saloon and Wagon R were also launched.
In 2000, Maruti became the first car company in India to launch a Call Center for internal
and customer services. The new Alto model was released. In 2001, Maruti True Value,
selling and buying used cars was launched. In October of the same year the Maruti
Versa was launched. In 2002, Esteem Diesel was introduced. Two new subsidiaries were
also started: Maruti Insurance Distributor Services and Maruti Insurance Brokers Limited.
Suzuki Motor Corporation increased its stake in Maruti to 54.2 per cent.
In 2003, the new Suzuki Grand Vitara XL-7 was introduced while the Zen and the Wagon
R were upgraded and redesigned. The four millionth Maruti vehicle was built and they
entered into a partnership with the State Bank of India. Maruti Udyog Ltd was Listed on
BSE and NSE after a public issue, which was oversubscribed tenfold. In 2004,
the Altobecame India's best selling car overtaking the Maruti 800 after nearly two decades.
The five-seater Versa 5-seater, a new variant, was created while the Esteem was re-
launched. Maruti Udyog closed the financial year 2003-04 with an annual sale of 472,122
units, the highest ever since the company began operations and the fiftieth lakh (5
millionth) car rolled out in April 2005. The 1.3 litre Suzuki Swift five-door hatchback was
introduced in 2005.
In 2006 Suzuki and Maruti set up another joint venture, "Maruti Suzuki Automobiles
India", to build two new manufacturing plants, one for vehicles and one for
engines. Cleaner cars were also introduced, with several new models meeting the new
"Bharat Stage III" standards. In February 2012, Maruti Suzuki sold its ten millionth vehicle
in India. In July 2014 it had a market share of more 45%.
Maruti Suzuki is now looking to shift its current manufacturing facility located in the
downtown Gurgaon as apparently it is short of space and logistics. It is hunting for a huge
700 acres of plot of land.
Sales and service network
Maruti Suzuki has 1,820 sales outlets across 1,471 cities in India. The company aims to
double its sales network to 4,000 outlets by 2020. It has 3,145 service stations across 1,506
cities throughout India. Maruti's dealership network is larger than that of Hyundai,
Mahindra, Honda, Tata, Toyota and Ford combined. Service is a major revenue generator
of the company. Most of the service stations are managed on franchise basis, where Maruti
Suzuki trains the local staff. Other automobile companies have not been able to match this
benchmark set by Maruti Suzuki. The Express Service stations help many stranded vehicles
on the highways by sending across their repair man to the vehicle.
Maruti Insurance
Launched in 2002 Maruti Suzuki provides vehicle insurance to its customers with the help
of the National Insurance Company, Bajaj Allianz, New India Assurance and Royal
Sundaram. The service was set up the company with the inception of two subsidiaries
Maruti Insurance Distributors Services Pvt. Ltd and Insurance Brokers Pvt. Limited
This service started as a benefit or value addition to customers and was able to ramp up
easily. By December 2005 they were able to sell more than two million insurance policies
since its inception.
Maruti Finance
To promote its bottom line growth, Maruti Suzuki launched Maruti Finance in January
2002. Prior to the start of this service Maruti Suzuki had started two joint ventures Citicorp
Maruti and Maruti Countrywide with Citi Group and GE Countrywide respectively to assist
its client in securing loan. Maruti Suzuki tied up with ABN Amro Bank, HDFC Bank,
ICICI Limited, Kotak Mahindra, Standard Chartered Bank, and Sundaram to start this
venture including its strategic partners in car finance. Again the company entered into a
strategic partnership with SBI in March 2003 Since March 2003, Maruti has sold over
12,000 vehicles through SBI-Maruti Finance. SBI-Maruti Finance is currently available in
166 cities across India.
Citicorp Maruti Finance Limited is a joint venture between Citicorp Finance India and
Maruti Udyog Limited its primary business stated by the company is "hire-purchase
financing of Maruti Suzuki vehicles". Citi Finance India Limited is a wholly owned
subsidiary of Citibank Overseas Investment Corporation, Delaware, which in turn is a
100% wholly owned subsidiary of Citibank N.A. Citi Finance India Limited holds 74% of
the stake and Maruti Suzuki holds the remaining 26%. GE Capital, HDFC and Maruti
Suzuki came together in 1995 to form Maruti Countrywide. Maruti claims that its finance
program offers most competitive interest rates to its customers, which are lower by 0.25%
to 0.5% from the market rates.
Maruti TrueValue
Maruti True service offered by Maruti Suzuki to its customers. It is a market place for used
Maruti Suzuki Vehicles. One can buy, sell or exchange used Maruti or Non Maruti vehicles
with the help of this service in India. As of 10 August 2017 there are 1,190 outlets across
936 cities.
Ciaz
Ertiga
Wagon R,
Alto K10,
Swift,
Celerio
Swift Dzire,
Baleno ,
Omni,
Ignis,
S-Cross.
Maruti Udyog limited (MUL) is in a leadership position in the market with a market
share of 48.74
Major strength of MUL is having largest network of dealers and after sales service
centers in the country.
Good promotional strategy is adopted by MUL to transfer its thoughts to
the people about its products.
Maruti Suzuki recorded highest number of domestic sales with 9,66,447 units from
7,65,533 units in the previous fiscal. It recently attained the 10million domestic
sales mark.
Strong Brand Value and Loyal Customer Base are big strengths for MUL
There are around 15 vehicles in Maruti Product portfolio. Has good product lines
with good fuel efficiency like Maruti Swift, Diesel, Alto etc
Alto still beats the small car segment with highest number of sales
MUL is the first automobile company to start second hand vehicle sales through its
True-value entity.
MUL has good market share and hence it’s after sales service is a major revenue
contributor.
Low interior quality inside the cars when compared to quality players
like Hyundai and other new foreign players like Volkswagen,Nissan etc.
Government intervention due to having share in MUL.
Younger generations started getting a great affinity towards new foreign brands
The management and the company’s labor unions are not in good terms. The recent
strikes of the employees have slowed down production and in turn affecting sales.
Maruti hasn’t proved itself in SUV segment like other players.
MUL has launched its LPG version of Wagon R and it was a good move
simultaneously
MUL can start R&D on electric cars for a much better substitute of the fuel.
Maruti’s cervo 600 has a huge potential in tapping the middle class segment and
act as a strong threat to Nano
New DZire from Maruti will capture the market share and expected to create the
same magic as Maruti Esteem(currently not available)
Export capacity of the company is giving new hopes in American and UK markets
Economic growth of the country is constantly increasing and the government is
working hard to increase the gdp to double digit.
MUL recently faced a decline in market share from its 50.09% to 48.09 % in the
previous year(2018)
Major players like Maruti Suzuki, Hyundai, Tata has lost its market share due to
many small players like Volkswagen- polo. Ford has shown a considerable
increase in market share due to its Figo.
China may give a good competition as they are also planning to enter into Indian
car segment
Launch of Hyundai’s H800 may result in the decline of Alto sales
Nexa Kottayam -- Company Profile
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Secondary data:
The secondary data was collected from company websites, organizational manuals,
previous reports and journals.
Secondary Data
Secondary data was collected from the company website, product catalogue, business
journals, research reports etc.
Interview method:
The interview method of collecting data involves presentation of oral-verbal stimuli and
reply in terms of oral-verbal responses. The method can be used through personal
interviews and telephone interview. The interview method of research, typically,
involves a face-to-face meeting in which a researcher (interviewer) asks an individual a
series of questions.
Questionnaires:
Questionnaire is designed to collect data concerning personal preferences, social
attitudes, belief, opinions, behaviour patterns, group practices and habits, and such other
information’s, from large diverse and widely scattered group of people. The researcher
used self- prepared questionnaire as the tool of data collection. A questionnaire is a list
of questions, usually printed, submitted for replies that can be analysed for usable
information
It is free from the bias of the interviewer answers are in respondents own words.
Respondents have adequate time to give well thought out answers.
Respondents who are not easily approachable can also be reached conveniently.
There is low cost even when the universe is large and widely spread geographically.
Large samples can be made use of and thus the results can be made more dependable
and reliable.
4.7 DATA ANALYSIS TOOLS
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The present study had been undertaken for period of 45 days from December to January.
On the first phase of the study is identifying the problem. The second phase collecting
the questionnaire and interpreting it by using different statistical tools and giving the
findings and recommendations.