International challenges to enter the Indian market

After economic liberalization in India, the Indian automotive industry has growth dramatically and cause increased competitiveness in automobile market. India’s fast economic growth led to the development of its domestic automobile market which attracted many multinational automobile manufacturers to set up in India with local manufactures collaboration, both technical and financial. As a result, annual sales of passenger cars in India exceeded 1.5 million units.

Malaysian national carmaker, Proton could move forward their business to Indian automotive market in order to expand its international market. At the beginning stage, Proton can market the Savvy, the Saga and the Persona in India. This three Proton models can be selected to ensure potential growth of the company in Indian automotive market. Savvy is a super-mini car are being sourced from Renault which targeting on the market where the potential customers are those seeking for a compact car and also high efficiency fuel consumption. Furthermore, Saga is focusing on the family that seeking for an economic family car. And also Persona is targeting on higher income customers which it provides better handling performance.

Proton can seeks for collaboration with local manufactures to penetrate Indian automotive markets and develop attractive models to compete with growing competition from foreign giant carmakers in its domestic market. Moreover, collaboration with local manufactures can help proton to overcome the challenges such as cultural forces, political/legal forces, competitive forces, economics forces and also India’s geography & infrastructure.

Any company is faced marketing challenges when enter to a foreign market. The same thing will happen to Proton when entering Indian automotive market. International challenge that will be faced by proton such as:

Competitive Forces – The Indian automotive industry is one of the fastest growing manufacturing sectors. Many international carmakers, either by collaboration with Indian companies, have set up in India since last decade. The major breakthrough is the “Nano” by Tata Motors which it has received worldwide attention which proved that India can produce an international standards automobile and also at a much lower cost through their innovative design. Therefore, it is very important for Proton to gain operation excellence in order to growth and face the high competition in Indian automotive industry.

Cultural Forces – Another major challenge is the shortage of skilled man power for Indian automotive industry. In India, auto industry is facing severe shortage of both skilled technical and managerial manpower. This challenge comes from the poor training infrastructure and the social perception. Though India has a vast pool of talented and skilled man power, the country needs to give support to treasure their human resources to excel in the industries. Therefore, Proton will be faced shortage of skilled manpower to be creativity, innovative ideas, and expertise in different areas as well as servicing and maintenance.

Economics Forces – The price of crude oil is increasing at very high rate. The high crude oil price will affect the economic growth of most of the world as well as India. Therefore, this will be affected India from becoming economic superpower. As a result, the rise in curd oil prices will also affect the development of Indian automotive industry. This necessarily means that to overcome the problem, Proton should be put more effort on R&D to create more vehicles that use alternative fuels and also vehicles that have high fuel consumption efficiency.

Geography and Infrastructures – The poor condition of the roads in India is another major problems faced by Indian automotive industry. The road infrastructure in India is poorly developed and the highways are in poor condition. Most of the roads are single lane roads that have built almost 50 years ago. Most of the roads condition cannot match with the rapid developing in the automobile industry. In addition, they are usually used by bullock carts and two wheelers. When the introduction of bigger and increasing number of vehicles in India, this would worsen the condition of the roads. This problem cannot be solved with only privatization of the road infrastructure but it still need the proper Road Development Program which its progress can affect the growth of Indian automotive industry.

Analysis on the needs for culture adaptation by Proton

History, geography and demography are not the only factors that have shaped the culture of India, but also by its ancient heritages. The ancient heritages were formed during the Indus Valley Civilization, the Vedic age and the Indian independence movement. There are a lot of differences in India’s languages, religions, dance, music, architecture and customs between one place to another. However, it still possess a commonality amount the cultures. The culture of India is an amalgamation of these diverse sub-cultures which has spread all over the country for several millennia old.

In the Indian culture, family plays an important role where the joint family systems are still prevailing. It is a system where the family members are live together. Normally, the head in the joint Indian family system will be the eldest male member. He makes all significant decisions and rules for the family, and other family members must abide to the decisions and rules that have been made. Therefore, Proton can uses this to target for the eldest male member in a family for their potential customers where they are able to influence the decision making process especially when buying highly involved products such as a passenger car.

On the other hand, the most common mode of transport in India is two-wheeler and three-wheeler. The two-wheeler is the largest market share in Indian automotive industry followed by the three-wheeler. Today, two-wheeler and three-wheeler is the most lucrative segment in Indian automotive industry. However, the passenger cars are expected to growth at high rates as more and more people rise from poverty in India. Most of the population of India lives in rural and semi-urban areas, and most of these people use two-wheeler and three-wheeler as a mode of transport and they wish to have a better transport when their household income has increased. So when income levels increase in those areas, the better vehicle purchased by them will be the small and economics passengers car. Moreover, with increasing incomes, the number of passenger cars being purchased will increase dramatically. Easy availability of finance and new innovations in manufacturing of passenger cars will maintain the strong growth in this segment. Hence, Proton should grab this golden opportunities by introduce small and high fuel efficiency passenger cars to Indian automotive market.

In order to successful growth in Indian automotive industry, Proton needs to appropriate adapt to India culture. To handle the differences in values and attitudes in India culture, Proton can seeks for collaboration with local manufactures to penetrate Indian automotive markets. In addition, Proton can also appoint an extensive experience people in the Indian automotive market which can help in handle the various cultures issues and also help in expand Proton business in India.

Market Segmentation

In today modern business world, in order for an organization to survive in the high competitive business environment, the organization must be highly innovative. For a business to success, the most straightforward way to select the right market segmentation where an organization can identify what kind of customers with different needs exist. Therefore, it is essential for Proton to select the right market segmentation, so that it cans successful growth in Indian automotive industry.

In India, the automotive market has been segmented into three segments: the small car segment, the mid-sized segment and the luxury sedan segment. However, Proton should focus on the small car segment and the mid-sized segment in Indian automotive market which these two segment have growth steadily due to it price and also high fuel efficiency.

Small car segment: This section includes the mini segment, which is domain by the Maruti and the Omni. Today, more consumers need a vehicle mostly due to the changes in their lifestyles and also increase in disposable incomes especially in urban markets. This is where the “super-mini segment comes into play. Savvy is a super-mini car are being sourced from Renault which the potential customers are those seeking for a compact car and also high efficiency fuel consumption. In addition, Saga can be used to target on the family that seeking for an economic family car. However, Proton will be faced competition in this segment from Maruti, Omni, Zen, MUL, Hyundai and Daewoo which should have been cheered by the growth in Indian automotive industry.

Mid-sized segment: The emergence of the mid-sized is due to the consumer’s lifestyle up gradation where they are seeking for mid-priced vehicles that provide more safety features and better handling performances. Earlier, this segment was dominated by MUL’s Esteem which enable it to enjoy the fruits of price, but all that is about to change. Today, this segment has high competitions due to new offerings within the segment from Fiat, Hyundai, GM, Peugeot, Honda and Toyota. Therefore, Proton must be prepared for the high competition from all these giant carmakers. Proton must select appropriate pricing strategy in this section due to this is the most important factor for Proton to success in Indian Automotive Industry.

Target Markets

Target marketing is a process when a seller identifies market segments and then selects and develops products and services which can fulfill their potential customer needs and wants. The process of targeting is different from segmentation due to it only involves the evaluating of segments which a business chooses to address. In Proton, it was easy for the group to identify its target market, when Proton plans a good job in surveying the market that can help them to segregate their potential customers.

Proton can be targeted for three different markets to sell the three models; Savvy, Saga And Persona.Savvy is a super-mini car are being sourced from Renault which targeting on the market where the potential customers are those seeking for a compact car and also high efficiency fuel consumption from the lower income groups. Furthermore, Saga can be used in focusing on the family that seeking for an economic family car. And also Persona should be targeted on higher income customers where the Persona can provide more safety features and better handling performance. All the potential customers shall be living in urban areas where a car is most likely to be viewed as a must. These potential consumers who are in the age group 25-55 years, employed, education level are fairly high and have good buying power.

Market Positioning

Proton will position itself as a high-quality and innovative carmaker in Indian Automotive Industry. Under the management of Dato’ Haji Syed Zainal Abidin Syed Mohamed Tahir Proton will determine its market position by producing high quality car to fulfill their customer’s wants at a price that is much lower as compare to their competitors. Proton has two main characteristics; the operation effectiveness and high quality car. Proton can be competed in Indian Automotive market through it aggressive marketing and emphasis on operational efficiencies which enable it maintaining an increase in revenue by selling cars at much lower price than its competitors. The improvement in performance to date will result in the enhancement of product portfolio, cost management and strengthening of the automotive ecosystem. To have the competitiveness, Proton must be rationalized the company’s dealer and distribution network. In addition, quality improvements must continue to be emphasized in order to make Proton has better market position.

Foreign market entry

Even though India’s government is not restricting foreign companies from setting up wholly owned subsidiaries, but it is better for Proton to set up in India with local collaboration, both technical and financial. Through joint ventures, Proton can be better understanding of local markets trend, government regulations and the competitors which enable Proton to reduce initial risks. Moreover, joint ventures with local companies can provide proton with the opportunity to gain new capacity and expertise and also enable Proton to enter new geographic markets and access to greater human resources. The most important is joint ventures allow Proton sharing of risks with a local venture partner. Therefore, joint ventures with a local company such as Maruti Udyog Limited (MUL), Premier Automobiles Limited (PAL) and Hindustan Motors (HM) will provides an easy way for Proton to enter Indian Automotive Industry.

Barriers of international marketing

During last two decade, a lot of efforts have been made by India’s government to fine-tune state policy perspective in a manner that allows automotive industry to growth. Since abolition of licensing in 1991, the automotive industry has shown great advances. In September 2001, public policy dispensation, minimum investments in manufacturing facilities, neutralization of foreign exchange was withdrawn by India’s government as a major initiative to bring policy framework which favorable the automotive industry. India’s Government also removed the quantitative restrictions on imports on 1st April 2001. Thus, this has freed the industry from restrictive environment which will help in the overall development of the automotive industry in the country.

However, there are a number of non- tariff barriers that needs attention from Proton. Some of the entries barriers will be faced by Proton in Indian automotive industry are the product modifications required for relatively poor road conditions and high levels of heat and dust. The poor condition of the roads in India is another major problems faced by Indian automotive industry. The road infrastructure in India is poorly developed and the highways are in poor condition. Most of the roads are single lane roads that have built almost 50 years ago. Most of the roads condition cannot match with the rapid developing in the automobile industry. Thus, in order for Proton to success in Indian automotive market, its needs to modify the three model cars (Savvy, Saga and Persona) to suit the poor conditions of India’s infrastructures.

Conclusions

After economic liberalization in India, the Indian automotive industry has growth rapidly. The Indian automotive Industry is now working in an open market. Many foreign carmakers have been set up in India through joint venture with local carmakers. This has made the Indian automotive industry to become highly competitive. Thus, when Proton wishes to enter Indian automotive industry, it must be prepared to have competitive advantages such lower prices, better quality and high fuel efficiency than competitors. In addition, Proton also needs to focus on the marketing challenges, marketing barriers and Indian cultures that might have certain impact on the development of the Proton business in Indian automotive industry. In order to successful growth in Indian automotive industry, Proton can seeks for collaboration with local manufactures to penetrate Indian automotive markets which helped Proton to be better understanding of local markets trend, government regulations and the competitors.