Term Paper Research on Kirloskar Motor Private Limited

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Introduction

Toyota Kirloskar Motor Private Limited (TKM) is an Indian joint veventntururee bebetwtweeeenn KiKirlrlososkarkar GrGrououpp anandd woworlrld’d’ss lalargrgesestt auautotomomobibilele company by volume Toyota Motor Corporation.

TKTKM'sM's grogrowthwth sinsincece incincepteptionion can be attattribributeutedd to one simpl simple,e, yet impimportortantant aspaspectect of its busbusineinessss phiphiloslosophophyy -- "Putt"Puttinging CustCustomeromer First". While managing growth, TKM has maintained its commitment to provide quality products at a reasonable price and has made every effort to meet changes in customer needs.

TTKMKM fifirmrmlyly bebelilieveveses ththatat ththee sucsuccecessss of ththisis veventntururee dedepependndss on providing high quality products and services to all valued customers through the efforts of its team members.

TKM, along with its dedicated dealers and suppliers, has adopted the "Grow"Growinging TogeTogetherther"" phphililosoosophphyy of ititss paparerentnt cocompmpananyy Toyota

thisMotor way, Corporation TKM aims to (TMC) furtherto contribute create long-term to the pro businessgress in growth.the Indian In autoautomotmotiveive indindustustryry,, rearealilizeze gregreateaterr ememploploymeymentnt oppopportortuniunitietiess for local citizens, improve the quality of life of the team members and promote robust economic activity in .

All Toyota employees are expected to embody these values in their daily work, including environmental protection activities. To "respect" the environment, we go to the source to identify and analyze problems ("Genchi Genbutsu"), move forward to "challenge" conventional ideas and old habits, to improve further ("kaizen") throuthroughgh "teamwork."

The framework provided by The Toyota Way enables our company to resresponpondd to, amoamongng othotherer thithings,ngs, the envenviroironmenmentantall chachallellengengess atat various stages of the life-cycle of a vehicle. These include greenhouse gas emissions, waste reduction, increased recycling and the banning of hazardous substance use in parts and components. These challenges wiwillll hahaveve ininevevititablablee coconsenseququenencecess foforr ToToyoyotata's's ororgaganinizazatitionon anandd ememplployoyeeees,s, and we mumustst balbalancancee ththemem wiwithth ouourr dedesisirere foforr fufututurere growth. In 1992, the Toyota Guiding Principles were established in direct response to the international initiatives agreed to at the Rio 'Ea'Eartrthh SuSummmmitit.'.' ThThisis susummmmitit fofocucusesedd on ththee popotetentntiaiall foforr a clclashash between trade and environmental rules, and resulted in a statement of priprincinciplepless abouaboutt forforestest manmanageagemement,nt, conconserservatvationion and sustsustainainablablee devdeveloelopmepment.nt. The ToyToyotaota GuiGuidindingg PrPrincinciplipleses are a corcornernerstostonene of

ToToyotyota’sa’s corcorporporateate manmanageagemenmentt phiphiloslosophophy.y. TheThesese priprincinciplepless wewerere

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updated in 1997, to ensure they continue to provide Toyota with a clear path towards achieving sustainable development.

These principles have been explored and developed in Toyota's Global Vision 2010, adopted in April 2002, which proposes a series of long- term policies on the theme of "Innovation into the Future." Toyota's Global Vision 2010 guides management in its response to long-term socsocialial chachangenges,s, comcombinbininging conconsidsidereratiationon for the envenviroironmenment,nt, the bbeenneeffiitt ttoo iittss ccuussttoommeerrss ooff vvaalluuee--aaddddeedd pprroodduuccttss aannd tthhee encouragement of its employees through shared prosperity and social involvement.

Based on the Guiding Principles, which codify Toyota's business spirit, ththee ToToyoyotata EarEarthth ChChararteterr (a(adodoptpteded in 19199292 anandd rerevivisesedd in 19199797)) embodies a comprehensive approach to global environmental issues. It outlines Toyota's basic policy and action guidelines towards effective envenviroironmenmentantall manmanageagemenmentt and impimprovrovemeementsnts.. The ToyToyotaota EarEarthth CharteCharterr underunderlineliness a commcommitmeitmentnt to envienvironmronmentalental exceexcellenllence,ce, not only through broad principles, but in concrete examples of what can be

PriPrincidonenciple plesthroughs and action the ToyToyota guidelines.ota EarEarthth In CharCharterconnectionter,, a EurEuropewithopean thean Toyota EnvEnviroironme nmentaGuidingntall Policy was developed as a means of linking principles, goals, targets and action plans with management structures and systems.

Empowering Employees.... To Achieve Perfection

TKM firmly believes that employees are the main source of strength for the organization. The human resources management in Toyota seeks to crcreateatee a cocorprpororatatee cucultltururee whwhereree vavalulueses susuchch as "C"Conontitinunuououss Improvement" and "Respect for People" are fully reflected in all actual corporate and individual activities. The company takes maximum care to ensensureure stastabilbilityity of empemployloymenmentt and strstriveivess to impimprovrovee worworkinkingg conditions.

To develop human resources and improve the technical skills of its employees, TKM's young team members are regularly sent to Japan, InIndodonenesisiaa anandd TaTaiwiwanan foforr trtraiaininingng prprogograramsms.. MoMorere ththanan 424255 teteamam members have benefited from such programs at various Toyota plants worldwide. TKM also believes in continuously improving its products and practices. Every team member is encouraged to give suggestions to improve the product, efficiency of processes or working conditions. They are also appropriately rewarded for the same. Thus TKM seeks to progress by empowering its employees.

Recognition

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At TKM, they look to continuously improve not only products but also prprococesessesess anandd seservrvicice.e. ThTheieirr obobsesessissionon wiwithth peperfrfecectitionon hahass bebeenen rerecocoggninizzeded by vvarariiououss iinsnsttititututiiononss susucchh as JD PPowoweerr anandd TNTNSS Automotive, as well as automotive publications like Overdrive, as the rereasasonon foforr ththee sucsuccecessss of ToToyoyotata prprododucuctsts in InIndidiaa and acacrorossss ththee globe.

Local Community Development

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

The Indian market is divided into various segments from Segment

segsegmenA toment). E(witht).BelBelow Aow being gragraphs smallphs proprovid carvide segmente the catcatego andegory E rybeing wiwisese the brebreaku bigakup luxuryp of car the market share in each segment where Toyota is present based on the sales data of Jan-June 2010.

Fig. 1: Segment B Sedan

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Fig. 2: Segment C

Fig. 3: Premium D

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Fig. 4: Multipurpose vehicle

Fig. 5: SUV Medium

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Fig. 6: SUV Premium

Factors that affect the Industry

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

Like other industries operating under free market, capitalistic systems, vieviewiwingng the autautomoomotivtivee indindustrustryy thrthrougoughh the lelensns of PoPorterter’sr’s FivFivee Forces can be helpful in understanding the forces at play.

Degree of Rivalry

Global companies today compete in the Indian market, while INDIAN companies have globalized themselves. In the 1990s, after the opening up of Indian economy, many Global players entered INDIA and have been very focused in growing their shares of the market. The great diversity of rivals in terms of cultures and associated philosophies has intensified rivalry in the industry. The degree of rivalrivalryry in the automotiautomotiveve indusindustrytry is furthfurtherer heighteneheightenedd by high fixed costs associated with manufacturing and trucks and the low switching costs for consumers when buying different makes and models. The rivalry is especially very intense in the small car segment where INDIA is emerging as a global manufacturing hub.

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Threat of Substitutes

ThThee thrthreateat of subsubstistituttuteses to the autautomoomotivtivee indindustustryry is faifairlrlyy mimild.ld. Numerous other forms of transportation are available, but none offer ththee ututililitity,y, coconvnvenenieiencnce,e, inindedepependndenencece,, anandd vavaluluee afaffofordrdeded by automobiles. TThehe swswititchchiningg cocoststss asassosociciatateded wiwithth ususiningg a didiffffererenentt momodede of transportation, such as train, may be high in terms of personal time (i.e., independence), convenience, and utility (e.g., luggage capacity), but not necessarily monetarily (e.g., round trip train fare would most likely be less expensive than the cost of fuel consumed on a similar round trip, daily parking, car insurance, and maintenance). The exceptiexceptionon to this statestatementment occurs in the global urban areas with highighh poppopulaulatiotionn dendensitsitiesies.. In thethesese areareas,as, the subsubstistituttuteses avaavaililablablee (e.g., walking, mass transit, bicycles, etc.) can be less costly or less titimeme coconsnsumuminingg ththanan autautomomobobilileses and ththusus alalteternrnatiativeve momodedess of transportation are often preferred. T Thehe ththrereatat of subsubststititututeses is grgreaeateterr in inindidivividudualal sesegmgmenentsts of ththee

consumersininduduststryry susuch preferringch as SUSUV’V’s fuels efficient duduee to cars. eveverer inincrcreaeasisingng fufuelel prpriciceses anandd

Barriers to Entry

The barriers to enter the are substantial. For a new company, the start-up capital required to establish manufacturing cacapapacicityty to acachihievevee mimininimumumm efeffificicienentt scscalalee is prprohohibibititivive.e. An automotive manufacturing facility is quite specialized and in the event of failure could not be easily retooled. Although the barriers to new cocompmpanianieses araree susubsbstatantntiaial,l, gogovevernrnmementnt pupushsh to inincrcreaeasese FDFDII inin automobile sector is attracting Global automobile majors in INDIA.

Buyer and Supplier Power

In the relationrelationshipship between the automautomotivotivee industindustryry and its supplierssuppliers,, the powpowerer axiaxiss is subsubstastantintiallallyy tiptippedped in the indindustustryry’s’s favfavoror.. The automotive industry is comprised of powerful buyers who are generally ablablee to didictctatatee ththeieirr tetermrmss to ththeieirr susupppplilierers.s. ThThereree araree spspececifificic chchararacacteteririststicicss ththatat mmakakee memembmbererss of ththee auautotomomotitiveve ininduduststryry powerful buyers: (1) there is not a grand proliferation of companies manufacturing automotive, and the four largest automotive companies

addedin the inINDIA the INDIAhave roughly(2) automotive 90% of parts the value(e.g., oilof filters,shipm entsmufflers, and valuebelts,

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etc.) are standardized commodities and these parts are only used on automobiles; and (3) backward integration can and does occur very often in the industry.

In the relationship between the automotive industry and its ultimate consumers, purchasers of finished vehicles, the power axis is tipped in the consumers’ favour. Consumers wield the greatest power in this relationship due to the fairly standardized nature of the automotive comcommodmodityity (a vehvehicicle)le) and the low swiswitchtchinging coscoststs assoassociciateatedd witwithh selecting from among competing brands. Also the Indian consumer is very price sensitive and thus companies can’t take liberties in pricing beyond a point. However, the automotive industry remains marginally powerful due to the large customer to producer ratiratio.o. The automotive industry is a dynamic place. With the forces above at play, and with history as a guide, it is safe to say that the automotive industry continue to change, evolve, and adapt.

The Macro economic factors affecting the Industry

Demographic:

With rising disposable incomes in the average Indian household, the market potential for automobiles is huge. There is a growing concept of sesecocondnd vevehihiclclee anandd pepeopoplele araree grgradaduauatitingng frfromom 2 whwheeeelelersrs to 44 wheelers.

Political:

With the opening up of Indian economy in 1991-92, there is constant push from the government to the automobile sector by encouraging R&R&D,D, alallolowiwingng FDFDII anandd grgranantitingng of SpSpececiaiall ececononomomicic zozoneness foforr automobile sector.

Economic:

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The Indian economy is growing at a rapid pace with it being the second fastest growing economy only after china. The averaaveragege GDP for 5 years before recession was 8.8% and post-recession also the economy has bounced back. The demand for automobiles by individuals as well as by industry is growing very fast and is attracting huge investments.

Technological:

The Indian automobile industry has come a long way from the era of AmbAmbassassadoadorsrs carcarss wiwithth no tectechnohnologlogicaicall enhenhancancemeementsnts oveoverr yeyearsars.. Today with so many players in the market, technology and innovation is bebecocomimingng ththee dedecicididingng fafactctoror in ththee cocompmpetetititivivenenesesss of ththee companies. The introduction of the world’s cheapest car Tata Nano is a shishininningg exexampamplele of tectechnohnologlogicaicall inninnovaovatiotionn in IndIndianian AutAutomoomobilbilee industry.

The product lineup

PPrroodduucctt KKeeyyPPooiinntt IInnnnoovvaa CCrreeatateedd nneeww sseeggmmeenntt nnamameedd MMPPVV – MMuullttii PPuurrppoosese VVeehhiiccllee Revamped the segment completely. Today it defines the Fortuner segment trend in industry. Fortuner’s today’s sales volume is more than that of entire segment before its launch. Land Cruiser Has seen strong growth of % yoy in volume after launch of Prado diesel version LaLandnd CrCruiuiseserr FlFlagagshishipp LLandand CrCruiuiseserr bbrarandnd acracrososss tthehe wwororldld.. CoCororollllaa AAltltisis WoWorlrld’d’ss hhigighehestst sosoldld cacarr ttililll ddatate.e. Camry Toyota’s flagship hybrid brand is also world’s highest Prius selling hybrid car.

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PPrroodduucctt SSeeggmmeenntt

IInnnnoovvaa MMuullttiiPPuurrppoosse eVVeehhiiccllee FFoorrttuunneerr SSppoorrttssUUttiilliitty yVVeehhiicclle e((MMiidd)) LLaanndd CCrruuiisseerr PPrraaddoo SSppoorrttss UUttiilliittyy VVeehhiiccllee ((PPrreemmiiuumm)) LLaanndd CCrruuiisseerr SSppoorrttss UUttiilliittyy VVeehhiiccllee ((PPrreemmiiuumm)) CCoorroollllaaAAllttiiss CSSeeggmmeenntt CCaammrryy ESSeeggmmeenntt PPrriiuuss ESSeeggmmeenntt

PPrroodduucctt KKeeyy PPrroodduucctt CCoommppeettiittiioonn CCuurrrreenntt ppoossiittiioonniinngg IInnnnoovvaa MM&&MMSSccoorrppiioo, ,XXyylloo MMuullttiiPPlleeaassu urreeVVeehhiiccllee Ford Endeavour, Mitsubishi Fortuner The Art of Power Outlander Land Cruiser AAuuddiiQQ55, ,BBMMW WXX55 AAllllTTeerrrraaiin nLLuuxxuurryy Prado LLaanndd CCrruuiisseerr AAuuddii QQ77,, BBMMWW XX77 TThhee PPrriiddee ooff tthhee WWoorrlldd Cruze, Honda Civic, Designed to Inspire Corolla Altis Skoda Laura Envy CCaammrryy SSkkooddaa SSuuppeerrbb,, HHoonnddaa AAccccoorrdd BBeeyyoonndd EExxcceelllleennccee Planet's Favorite Prius Hybrid Car

The corporate and business level strategy

Entering into a small car segment

With the unveiling of Etios in Delhi 2010, Toyota announced its foray into small car segment i.e. A and B Segment. This segment is already cluttered and also a stronghold of Maruti . Apart from Maruti, Hyundai and Tata are dominating this segment. However, the keen interest shown by multinational players like General Motors, Ford,

ThisVolkswagen, market commands Nissan and Honda makes this segment very competitive.

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New plant

SeSecocondnd plplanantt is cocomimingng up nenextxt to exexisistitingng onone,e, in BiBidadadidi nenearar . The investment for this plant is estimated at INR 3,200 crore. Production capacity of 70,000 in first year and to be ramped up to 2 lac subsequently.

Localization

Small car market is much cost driven. To keep cost under control, TKM has plan to increase localization of components. For launch of small car T TKMKM wiwillll have have ararououndnd 6060%% of lolocacall cocontntenent.t. (6(60%0% of cocostst of ththee vehicle). And it also plan to manufacture engine and chassis locally to take localization level to 95%. This is significantly higher than 20 to 30% of localization in current range of Innova, Altis & Fortuner.

Dealer network

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

Connecting with TG – Toyota Q Promise and ATL

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

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