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Volkswagen Entry Strategy into India

A brief presentation about international marketing, and Volkswagen's entry strategy into India.

Enzo Nicolas Rossi

on 22 March 2011

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Transcript of Volkswagen Entry Strategy into India

Chakan Why? How? Why Germany/Volkswagen? Germany is a traditionally industrial country. Volkswagen is the best performing car manufacturer in Europe Why India? India is a rapidly developing country, with a rising middle class.
Demand for passenger vehicles is rising rapidly INDIA Country Profile Fabia Laura Superb TIME FIGURE
Sep.2010 845
Oct.2010 385
Nov.2010 403
Dec.2010 403
Sep.2010 256
Oct.2010 756
Nov.2010 970
Dec.2010 1853
Sep.2010 366
Oct.2010 420
Nov.2010 279
Dec.2010 246
Sep.2010 38
Oct.2010 44
Nov.2010 30
Dec.2010 18
Sep.2010 10
Oct.2010 0
Nov.2010 3
Dec.2010 2
Beetle Phaeton Polo Passat Vento Jetta TIME FIGURE
Sep.2010 107
Oct.2010 59
Nov.2010 0
Dec.2010 56
Sep.2010 254
Oct.2010 281
Nov.2010 191
Dec.2010 236
Sep.2010 1364
Oct.2010 1615
Nov.2010 2413
Dec.2010 3160
Sep.2010 2891
Oct.2010 2344
Nov.2010 1975
Dec.2010 2356
GERMANY Country Profile GDP $3.33Trillion

GDP per capita $40,670

India's trade with Germany in 2004-05 stood at US $ 6.5 billion, (20% growth)
India's exports to Germany were US $ 2.64 billion while India's imports from Germany were US $ 3.86 billion.
Bilateral trade has been growing at a record 20% for the past 3 years.
The inflow of total German FDI into India (1991-December 2005) at US $ 1.34 billion has been less than one and a half billion dollars.
There are more than 600 German companies operating in India and an increasing number of Indian companies investing in Germany.

Source: Economy Watch GDP 1.31 Trillion USD
GDP per Capita 1,134 USD
Population: 1,155,347,678 (2009) • 2nd fastest growing automobile market (1st=China.)

• Passenger vehicle production increase by a third in the last year. Expected output for 2011: 2.5 million vehicles

• “Small car” production expected: 3 million units by 2016. Design and manufacture of small vehicles.

• Production of trucks and buses increased by nearly 66% between April 2010 and Aug 2010... Automobile Market in India: QUICKFACTS Second largest market for motorcycles worldwide. (4.5 million units was registered during April 2010 – Aug 2010, growth of 27%.)

Increasing auto parts industry is also scaling up, as global car manufacturers are increasing their component sourcing from India, due to cost and engineering competencies.
Competition is intense as most global firms have entered the market. Some more facts...
Passenger Cars Two wheelers
USA 478 14
United Kingdom 373 12
Japan 395 115
Germany 508 36
China 3 8
South Korea 167 59
India 5 27

Vehicle Penetration
(per 1000 people) Sales of car units Cars vs. Motorcycles Indo-German Economic Relationship Domestic competition:
Tata Nano "The people's Car"
Retail Price: less than £1200 Q7 Q5 TT A4 A6 A8 R8 TIME FIGURE
Sept.2010 60
Oct. 2010 67
Nov.2010 53
Dec.2010 55 TIME FIGURE
Sep.2010 67
Oct.2010 57
Nov.2010 70
Dec.2010 37
Sep.2010 0
Oct.2010 0
Nov.2010 3
Dec.2010 2 TIME FIGURE
Sep.2010 114
Oct.2010 128
Nov.2010 118
Dec.2010 101
Sept.2010 60
Oct.2010 102
Nov.2010 175
Dec.2010 14 TIME FIGURE
Sep.2010 0
Oct.2010 0
Nov.2010 31
Dec.2010 2
Thank you for listening! Any Questions? The Future of VW India
Eco-Friendly growth
Hybrid Engines
Lower manufacturing emmissions
Other projects
Second hand business by 2012
Low cost Diesel/Sedans produced exclusively for India (Suzuki's expertise) Sales Goals Best-Selling 2010: VW Polo. 18,640 units sold Best-selling model in 2010:
Skoda Fabia. 8266 units Best-selling model 2010: A4. 1186 units Some more figures: Sales Growth of 180% from Jan. to Dec. 2010 2009: 19001 vehicles
2010: 53341 vehicles VW Group total: Volkswagen Brand Sales growth 500% from 2009 to 2010 2009:2081

Volkswagen used Skoda to learn about the market, and as soon as it was pertinent, invested in a factory in India.

Volkswagen invested in two state-of-art factories, meaning that they have long term goals.

Strategically targets India's growing middle class, advertising in the printed media and offering smaller, high-quality vehicles.

Their sales and market share are projected to continue increasing in the. Conclusion: Karolina W.
Junlin P.
Yedi G.
Mario D.R.
Enzo R. ENTRY STRATEGIES Wholly owned subsidiary
Company Aqcuisitions
Cooperation Strategies Joint Venture
Strategic Alliance
Overseas Production/investment
Local subsidiary production
Contract manufacture Overseas Production/Investment Direct Export Direct Marketing
Distributors and agents
Direct sales visits Indirect Export Trading companies
Domestic purchasing offices
Export management company Involvement Wholy owned subsidiary Aquisitions Joint Venture/Alliance Local Subsidiary Production Direct Exporting Contract Manufactures Piggy Backing Less logistic costs
Avoid tariffs
Lower labour costs
Good PR w/ Government High risk
Large capital investment needd
Political risks
Expertise required Can potentially benefit both parties
Low risk method for beggining export operations
Greater focus in one product, or range of products
Carrier will work with complementary products
Product will be offered to the appropriate market segment
Exporter will benefit from carriers market knowledge Mother company can loose control of its products
Miss communication.
Conflicts may arise when mother company tries to regain control of its products
Carrier might find product very profitable and plagiarise it, or develop its own version.
Wholy Owned subsidiary:
Entered the market with "Skoda" brand vehicles. Setting up a plant in Shendra (Aurangabad)

Once they had enough market knowledge, they invested in the Chakan manufacturing plant and started producing Volkswagen brand vehicles locally.

Purchased 19% of Suzuki Maruti, leader in the Asian MArkets

AUDIS sold by VW group India are imported from Germany. Volkswagen manufacturing plant in Chakan, Pune Distributors • Reduced financial expenditure
• Distribute risk
• Lower level of technological
risks and resources invested
• Usually distributors also offer
credit terms
• Can provide assembly and
after-sales and maintenance
• Use of local knowledge and
• Well established and
operating networks The control of the
company is lower
Distributer business area
might be unfamiliar to
parent Local legally independent
sales office of the mother
Gives bigger control and
revenues for the mother
Provides window and new
staff Requires bigger investments
Involves taking greater risks
Higher initial financial
commitment Lower costs
Spreads out risk
Access to outside expertise in selling the product,
Lower capital requirements, (no production)
Streamlines the manufacturing process
Mutually beneficial
Specialisation, main company is able to completely focus on sales, advertising and marketing. Only works if gets involved with the right manufacture
Hard to track prices when the market changes
Company may need to deal with suppliers for the products they are selling
Supplier may only want to deal with the original manufacturer
Outsourcing company is only motivated by profit, the only way they can achieve this is by decreasing expenses and this can compromise product quality Summary Volkswagen and its brands
Profile of Germany as an exporting country
Profile of India & its passenger-vehicle market
Market Entry Strategies
-Table comparing selected entry strategies
-VW entry into the Indian market described
Sales Figures
VW Advertising in the Indian Market
Future aims/goals of VW in India
Conclusion Rapid growth
Greater knowledge of local market
Low labour cost
Local manufacture viewed favourably
Provides window and new staff Technological/can exploit small/ large company synergy
Shared ownerships (distributed risk)
Joint financial strength • Repliccae success in the Chinese market in India by achieving a market share of 20% by 2018
• Sell 10 million cars in the next eight years in India in order to surpass carmakers like GM and Toyota New business area might be unfamiliar to parent company
Higher risk than other modes
Requires more resources and commitment
May not have a local partner with contacts and expertise as in a joint venture
High initial financial commitment Partners do not have full control of management (potential for problems) Low capital investment – cost of site
Small size makes no difference
Shorter distribution chain
Low risks and high flexibility
Update are easy and immediate • Time length to break even too
long (on average 8 years)
• Unfamiliarity with market
might lead to errors.
• Market knowledge required
• Tariffs /NTBs
• Some investment sales in
organization required
• Higher unit cost to consumer Export Management Companies Low initial investment
Can often provide better service than in-house sales
provides fast access to foreign markets Less control over pricing and merchandising
Limited market development
High costs for large quantities + - + - + - + - + - + - + - + - + - 99.35% 100% 100% 100% 100% 100% 70.94% 90.1% 19.9% 49.9% 29.9% H1FY2003 H1FY2004 Share of various segments in the Indian Passenger Car Market

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