automotive industry competitive analysis

automotive industry competitive analysis

Industry & Competitive Analysis - Automotive Industry

  • Industry & Competitive Analysis- Automotive Industry -Group 4 Danny Dharmawan Kosasih Ratih Damayanti Widyarini Utami
  • Presentation Flow
    • Introduction
    • Structure
      • Market structure.
      • Car Categories
      • Herfindahl-Hirschman index (HII)
      • Government Policies & Environment Issues
    • Conduct
      • Porter’s Five Forces
    • Performance
      • Sales
      • Profitability
    • Competitive Strategy
      • Business Strategy Recommendation
  • Introduction
  • ASEAN Car Market
    • Biggest World Car Makers: Toyota, Mitsubishi, Suzuki, General Motor and Ford have been expanding to Asia region
    • They place production bases in ASEAN countries – for efficiency and marketing deeds
    • Japanese Car dominates ASEAN market
    • New contenders: China and Malaysia
    • AFTA sharpened automotive competition in ASEAN – in 2003
  • Indonesia: Where are we standing?
    • 4 wheelers population in Indonesia per 2005=14.471.750* or increased by 325% in the past 10 years
    • Indonesia is becoming production centre
    • ATPMs in Indonesia now only hold distribution
    • While manufacturing trend are operated by foreign car makers: i.e. Toyota and Suzuki
    • No clear policy to protect domestic competition
    • Next question, where are we heading to?

    * Source: Direktorat Samapta Polri/ GIAMM – notes: not included Ranmor ABRI and diplomatic corps - 2005

  • Indonesia: 2010 Vision
    • Automotive industry is one of accelerator industries to achieve 7% economic growth
      • Textile, Shoes & apparels
      • Electronics and its components
      • Automotive and its components
      • Shipping & docks
      • Source: Visi 2030 & Roadmap 2010 Industri Nasional – KADIN 2007
  • Indonesia Economic Indicator Forecast Source: Economist Intelligence Unit. Country Forecast: Indonesia, September 2006 9.759 5.7 0,5 -0.3 3.6 6.2 2010* 9.310 6.0 0.9 -0.7 4.6 6.5 2008* 9.116 8.5 0.4 -0.8 7.0 6.0 2007* 9,166 11.3 0.4 -1.1 13.2 5.3 2006 9.528 5.9 0.7 -0.4 4.0 6.3 2009*
    • IDR / USD – Y^Y (Rp)
    • Interest (%) – Y^Y
    • Balance of Payment - % to GDP Growth
    • Budget Surplus (+) /Deficit (-)
    • Inflation (%)
    • GDP growth (%)
  • IIMS 15 th 19 - 28 July ‘07
  • Structure
  • Market Structure:Monopolistic Competition
    • Astra International (AI)& Indomobil Niaga Internationalare two largest automotive companies in the country having affiliation with a number of foreign principals.
    • They become agents for the Indonesian market.

    Vs

  • Market Structure: ATPM Competition Source: Gaikindo – Q1 2007 China Chery Unicor Prima Motor, PT France Renault Auto Euro Indonesia, PT Japan Hino Hino Motor Sales Indonesia, PT South Korea Ssangyong Indobuana Auto Raya, PT Japan Nissan Nissan Motor Indonesia, PT Germany Audi, VW Caravelle Garuda Mataram Motor Sweden Volvo Central Sole Agency, PT Japan Suzuki Indomobil Suzuki International, PT Indomobil Group Germany BMW Tjahja Sakti Motor, PT France Peugeot Astra France Motor, PT Japan Daihatsu Astra Daihatsu Motor, PT Japan Nissan Diesel Astra Nissan Diesel Indonesia, PT Japan Isuzu Pantja Motor Japan Toyota Toyota Astra Motor, PT Astra Group : Countries of Origin Brands Name of company ATPM by groups and brands
    • Other companies have been established by self.
  • Market Structure: ATPM Competition Countries of OriginBrands Name of company Source : Gaikindo – Q1 2007 Japan Mazda Mazda Motor Indonesia, PT Japan Subaru TC Subaru, PT Malaysia Proton Proton Edar Indonesia, PT Germany Porche Eurokars Chrisdeco Utama, PT Germany VW Car & Cars Indonesia, PT South Korea Daewo Starauto Dinamika, PT Britain Land Rover Java Motors, PT United States Ford Ford Motor Indonesia, PT South Korea KIA KIA Mobil Indonesia, PT South Korea Hyundai Hyundai Indonesia Motor, PT Britain Bentley, Daimler, Jaguar, Roll Royce Grandauto Dinamika, PT United States Chevrolet General Motors Indonesia, PT Germany Mercedes-Benz,Chrysler, Jeep Daimler Chrysler Indonesia, PT Others Japan Honda Honda Prospect Motor, PT Imora Group Japan Mitsubishi Krama Yudha Tiga Berlian Motors Krama Yudha Group

  • Market Structure: Market Domination
    • Astra International dominates the total car market in Indonesia
  • Domestic Car Sales 2007 Domestic Car Sales 2006 - 2007 Source:www.astra.co.id– 18 July 2007

  • Business Scheme
    • Taken example from Toyota Astra Motor (TAM) which shows manufacturer company with Supplier – Production – Buyer business scheme
  • TMMIN TAM TMMIN Source:www.astra.co.id– 18 July 2007 TAM

  • Car Categorization
    • Passengers cars consist of 3 types: sedan, MPV 4X2 & SUV 4X4 each with different types in engine capacity
    • Commercial cars consist of 3 types: bus, pick up/truck, double cabin 4X2/4X4 each with different weight (gross vehicle weight)

    Categories of Commercial CarsSource: Gaikindo – Q1 2007 For all cc GVW 24 ton (G/D) GVW 10 - 24 ton (G/D) GVW 5 - 10 ton (G/D) GVW 24 ton (G/D) GVW 10 - 24 ton (G/D) GVW 5 - 10 ton (G/D) Bus Cc > 3,0 lt (G) / 2,5 (D) 1,5 lt 3,0 lt (G) / 2,5 (D) 2,5 lt 3,0 lt (G) / 2,5 (D) 1,5 lt cc 3,0 lt 10% 50% 40% 1,5 lt 3,0 lt 10% 50% 40% 2,5 lt Rp. 200 million Rp. 150 – 200 million +/-Rp. 100 million Price around Brisk with many players High Sharp in competition Middle Lead in Market Share Low Competition IntensityBrands 32,528 54,214 170 318,904 2006 52,858 88,096 165 533,917 2005 46,382 28,858 21,448 Financing Value (Rp. Billion) 77,304 54,967 47,662 Total Value 483,148 354,629 317,748 Volume of Sales (unit) 160 155 150 Price (Rp million/unit) 2004 2003 2002 Year

  • New Entrant – Threat From Chinese Car
  • Substitute
    • 2 Wheelers – population in 2005 = 33.193.076*
    • Mass / Public Transportation

    * Source: Direktorat Samapta Polri/ GIAMM – notes: not included Ranmor, ABRI and diplomatic corps - 2005

  • Summary High Industry Attractiveness Low Buyer power Medium Supplier power Medium to High Substitutes/Complements Low to Medium Entry High Internal rivalry Threat to profits Force
  • Performance
  • Car Sales - Domestic Market, 1999-2006
    • 469% Increase in the 1999-2005 period
    • In 2000, sales surged to 300,965 units from only 98,813 units in 1999, due to deregulation in importing duties
    • After 2001, sales grew steadily until peaking at 533,917 units in 2005.
    • In 2006, sales dropped to 318,904 units as a result of drastic hikes in the oil fuel price late 2005. The fuel price hike weakened the buying power of the people.

    469% Source: Gaikindo– Q1 2007

  • Car Sales By Categories 2006
    • Sales on the domestic market in 2005 and 2006 were dominated by MPV and SUV, with sales totaling 328,272 units in 2005 and 203,342 units in 2006.
    • The market share of MPV and SUV rose because of sharper fall in the sales of other types of cars.

    %

  • Car Sales By Categories 2005 - 2006 Source : Gaikindo Q1 2007 318,904 40,738 56,921 203,342 17,903 2006 533,917 66,401 103,731 328,272 35,513 2005 Truck Pick Up MPV-SUV Sedan Total Category of comm. Cars Category of pass. Cars Year
  • Sales in 2007 IncreasingSource: Gaikindo– 2007
  • ProfitabilitySources: Financial Statement each company 0.11 0.14 0.13 0.13 0.14 ROE 0.04 0.05 0.05 0.05 0.05 ROA Toyota 0.16 0.16 0.15 0.14 0.13 ROE 0.06 0.06 0.05 0.06 0.05 ROA Honda 2003 2004 2005 2006 2007 – Q1
  • Competitive Strategy
  • Business Strength Matrix
    • Strategic Options for Toyota : Grow, Seek Dominance, Maximize, Investment*
  • Source: Business Growth Strategies For Asia Pacific Relative Competitive Strength Industry Attractiveness Hi Lo Hi Med Med

  • Capacity Per Year / Sales 2006
    • Toyota sales overlapping its production capacity – this shortage is fulfilled by Daihatsu production which also made Toyota Avanza and Toyota Rush
  • Business Strategy Recommendation
    • Maintain & launching new type model
      • MPV
      • SUV
    • Acquire consumer purchasing power segment
      • Around Rp. 100 – 150 million
    • Innovate fuel efficient car
    • Maintain increase Brand Image
    • Strategic alliance with Insurance and Financing companies
    • Increase amount of Dealer & improve After Sales Service
  • Thank You
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    Mercedes and BMW clearly have adapted differentiation strategy. The BMW Group’s strategy is to be number one. The strategy was introduced before the financial crisis appeared, in 2007. It is a strategy, which does not only focus on key numbers, but also to ensure customer and employee satisfaction and long-term sustainability. Mercedes strategy is to continue building the high quality vehicles with top safety rating and environmental features. Lexus originally had overall cost leadership strategy. In the last few years, the company started to different and being innovative. Their current strategy states: Do it right from the beginning. The company is committed to develop the most luxury cars.

    - Mercedes Benz (17.6%, Second)

    - Lexus (14.3%, third)

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    Mercedes Benz holds, the famous three-pointed star rating that is not only recognized as a symbol of quality and safety, but also denotes a proud heritage. Analyzing the competitive strategy of BMW with Lexus and Mercedes-Benz Mercedes and BMW clearly have adapted differentiation strategy. The BMW Group’s strategy is to be number one. The strategy was introduced before the financial crisis appeared, in 2007. It is a strategy, which does not only focus on key numbers, but also to ensure customer and employee satisfaction and long-term sustainability.

    Mercedes strategy is to continue building the high quality vehicles with top safety rating and environmental features. Lexus originally had overall cost leadership strategy. In the last few years, the company started to different and being innovative. Their current strategy states: Do it right from the beginning. The company is committed to develop the most luxury cars. Porter Competitive Analysis Market Share (percent, rank) -BMW (17. 9%, First) -Mercedes Benz (17. 6%, Second) -Lexus (14. 3%, third) Market Share Trends

    BMW has responded to consumer demands for more fuel efficient cars by producing smaller vehicles such as the 1-series, Mini Cooper, and compact X3 SUV. The company also introduces two Active E 100% electric concepts i3 and i8. Over the past several years there been sales increases for smaller vehicles. They have been the primary driver for the company’s net sales growth. The trend is BMW to increase its share in the luxury car market, where Lexus has a full range of hybrid vehicles and expects an increase in market share.

    Mercedes Benz trend is to lose market share for the last decade, and most likely BMW and Lexus will continue to eat Mercedes Benz’s lunch in the market. Lexus financial stability is backed by its parent Toyota. Financial strength BMW Group been named sector leader in by the SAM Group for the DJS Indexes for seven years in a roll. The BMW Group is also the only company in the automotive industry that is listed in this family of indexes every year since it was established in 1999. BMW common stock was the DAX-30 best-performing share last year.

    Mercedes Benz has the financial stability backed by Daimler AG. There index DDAIF increase to $92 per share after the company reported record annual results. Profitability BMW and Mercedes profits increased in 2011 while Lexus earnings fall in the last quarters due to the Sendai Earthquake. Management BMW has a typical corporate structure with several boards. Of those, the most important is the management and the advisory board. The management board is responsible for the daily operations and the strategic development of the organization.

    It consists of 10 persons, with a different area of responsibility. The advisory board supports the decision making in the management board. The advisory board consists of 20 persons – 10 are employee representatives and 10 are shareholder representatives. Mercedes and Lexus corporate structure is different as they are brands of Daimler AG and Toyota MC. Technology Position Today BMW is the leader in technology development and ahead of its main competitor Mercedes Benz, who has been a leader for many years. Map of Competitors Position: Future goals

    Mercedes-Benz is planning to build a new version of its A- and B-class compact cars. They will be launched at European dealerships in 2014. Mercedes’ current two-car compact lineup will double in the future. This will include the successors to the current B-class, expected in Europe this year and the replacement for the A-class next year. In addition, Mercedes will launch an A-class coupe in 2013, which will be called CLC and will compete against the BMW 1-series coupe. A year later an SUV, which is likely to be called GLC, should arrive at dealers and compete against BMW X1 and Audi Q3.

    Lexus are planning to bring at least two new cars to add to their lineup – a coupe and a small SUV, they will also increase their range of sports by presenting a variety of chassis and suspension options for better performance and handling. In addition, they have decided to focus on progressive technology in the future. This will come in the form of an expanded line of hybrid vehicles. Assumptions Lexus has the confidence that they can overcome long time leaders in the luxury car industry. In 1989, no one in the industry believed that Lexus posed any threat for them.

    In just a decade, Lexus redefined the customer satisfaction experience and became recognized for producing vehicles with industry leading quality levels. Mercedes Benz assumes they will gain its market shares back as they are extending their manufacturing and distribution network. Capabilities Mercedes has a strong brand name, and it is a symbol of prestige. The company is definite capable to get back as an innovative leader in automobile technologies. Lexus is known as low cost leader, because of its high volume manufacturing capabilities. Recommendations

    I admire BMW Group strategy to be number one. Last year numbers proved that is great. My recommendations are to continue to invest in R&D toward the development of new energy efficient vehicles. With the increasing oil prices, there is huge marked for hybrids, electric and hydrogen driven cars. It is an excellent opportunity for BMW to capitalize of that. References: Power, JD (2002). Retrieved on February 10, 2012, from Inside the minds: the automotive industry: industry executives from ford, Honda & more on the future of the automotive industry and professions.

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