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Theory of Environmental Scanning

Environmental scanning is a process of gathering, analyzing, and dispensinginformation for tactical or strategic purposes. The environmental scanning processentails obtaining both factual and subjective information on the businessenvironments in which a company is operating or considering entering. Environmental scanning is the process in which a firm continually collects andevaluates information about its external environment. There are six main categoriesof environmental data to consider when evaluating marketing decisions.

These aresocial forces, demographic forces, economic forces, technological forces, politicaland legal forces, and competitive forces.

There are several marketing procedures to consider when increasing customers inthe automobile detailing business. It is especially hard for smaller businesses to getstarted. One of the most important marketing tools used is personal selling. Sending a person from one car dealership to the next with fliers is a good way to promote the company. Word of mouth can also attract customers such as familieswho may need their car cleaned, but not a daily basis.

Another example of amarketing procedure is to identify loyal customers and offer them specialdiscounts The outside environment affects marketing in the automobile detailing business, because automobile detailers are dependent on the car dealerships.

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If business isslow for the dealerships it will hurt the detailing business. If there is a lot of competition in the area, then the business will have toconcentrate on marketing their business over the others. The size and reputation of a company can also affect the business.

There are many factors of marketing thatcan affect the way that the automobile industry operates.

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1. 2. 1. Product categories of the Automobiles Segment The Automobile segment comprises of the following four broad categories of vehicles • Passenger Vehicles • Commercial Vehicles • Three-wheelers • Two-wheelers Two-wheelers, being the most popular means of personal transport, alone account for about 75% of the total automobile production in India, while passenger vehicles account for nearly 16% of the production.

However, owing to their lower sales realisations, two wheelers account for only around 32% of the sales in terms of value while passenger vehicles account for around 62% of the same. Human Resource and Skill Requirements of the Auto and Auto Components Sector Page 9 of 91 Figure 4: Automobile Segment Product Categories Source: SIAM, IMaCS analysis In terms of actual production, a total of around 11. 2 million automobiles were produced in 2008-09, leading to sales of over Rs. 1,200 billion4 in the year. The production and sales trends for each category are as shown below: 1. 2. . Value Chain of the Automobiles Segment The Automobile segment, comprising of the OEMs, is at the topmost Tier of the Automotive Industry with a wide network of Tier I, II, III level suppliers supporting the OEMs for end product production. In terms of activity, Manufacturing is the most key function in the Automobile segment, owing to nearly 60-70% of the manpower engaged in this activity at the manufacturer’s end (direct employment). Indirect employment generated by this sector is considerable as personnel are employed in functions such as sales, finance, insurance, etc.

In terms of criticality, capturing the customers’ requirements and translating them into products that would sell in the market is the most challenging part of the value chain. In fact, players who are able to develop expertise in this area command a significant edge in the market and this is one of the key reasons why foreign players have been able to make place in the Indian market. Increasing consumer discerns and growing cost competitiveness has forced OEMs to manage the brand and outsource the rest. This has also resulted in increased tierisation of the automotive industry.

Demand drivers for Automobile Segment One of the key reasons for the rapid growth in the Automobile segment has been the strong influence of several favourable drivers of demand. While some of the demand drivers are off-shoots of favourable growth in the Indian economy, others have come by due to the comprehensive development of the Automobile segment. The key demand drivers for the automobile segment are shown below: Increase in income levels and thus purchasing power: Increase in disposable incomes have made cars affordable to a larger section of the population.

While the ratio of car prices to average monthly salaries was around 36 – 48 months in the past, it has dropped significantly to less than 24 months currently. This is also a result of decreasing automobile prices with increasing efficiency in production and stiff competition in the market. • Gradual shift to higher segment passenger vehicles: B and C segments have emerged as high growth segments over the last few years. In 2001-02, the A segment accounted for around 28% of sales while in 2004-05 it accounted for only 14%.

At the same time, the demand for premium vehicles has also grown significantly, though the volumes are still low compared with other segments. The trend in segmental sales is poised to undergo a sea change with the launch of high volume selling Tata Nano and other players eyeing to get into the ultra low-cost segment. • Availability of a wider range of products: The number of players as well as the number of products in the auto OEM space has increased, thus making more number of product options available to the end customer.

While even till late 80’s there were 8-10 major OEMs, today there are more than 30 OEMs with a wide variety of offerings in the market. The current market offers more than 75 options in two-wheelers, more than 30 in hatchbacks, close to 50 in sedans and luxury cars, more than 50 in SUVs, and close to 10 options in sports cars. • Availability of low-cost finance: Decline in interest rates and easy finance options have also enabled rapid increase in vehicle sales. It is seen that more than 90% of the vehicles (passenger vehicles) are currently sold under the financing route. Emergence of tier 2 cities and non metros: There has been a gradual shift in vehicle sales to smaller cities; markets other than the top 20 cities account for almost half the share of vehicles sold.

Decrease in product life cycles: The product life cycle had decreased from an average of 61 months to about 51 months between 2002 and 2005 and continues to decrease further. Also, purchases for replacement of existing vehicles have been increasing. Coping with the changing market requirements, OEMs have also been forced to reduce their new product introduction timelines in order to maintain their market shares. Emergence of two-vehicle families: With rising disposable income levels and changing life styles, especially in the key urban centres in India, the trend of two-vehicle families has been increasing and purchases are being made persons who already own vehicles. This has led to high demand of automobiles. Also, it is observed that consumers have a tendency to upgrade their vehicles during replacement leading to a shift to higher categories. Key Success Factors of the Automobile Segment Widespread sales and service network:

With a wide variety of options available in the market, meeting the key customer requirements becomes essential to maintaining one’s position. With increasing average trip lengths both in the intra-city and the inter-city applications, a widespread sales, distribution and service setup has become one of the topmost preferences in the buying behavior and thus enables higher sales and provides a competitive edge. For e. g. Maruti has used its wide service network as a point of differentiation over competitors. One-stop easy solutions: With financing emerging as the key route for the customer buying an automobile, automobile companies have started their own financing companies and tied up with banks to provide easy and one stop solutions for vying customers. Companies are also tying up with financial institutions having rural presence to provide additional financing options to customers in such areas. • Ability to enhance and vary product mix: Customer demands for more options in each category of vehicles mandate manufacturers to offer multiple products.

Also, it is to be ensured that the changing customer demands continue to be met. Thus, the ability to meet these market requirements enables higher sales volumes and better capacity utilization by using common manufacturing capacity. • Balance between outsourcing and in-house production: The make-or-buy decision for components and aggregates is critical to the costing of the product. In fiercely competitive industry, such decisions have a significant impact on the margins. However, the quality of the product should not be overlooked while deciding on outsourcing. Efficient operations: Intense competition requires existing players to initiate steps to reduce the cost of production. Effective and successful operation methods such as platform commonality, reduction in vendor base and workforce rationalization, if developed and maintain can even be one’s competitive edge. • Human resources: With more advanced manufacturing technology being adopted by auto OEM’s, the requirement of skilled personnel, especially at the operator level is key to higher productivity and quality of output.

Similarly with sophisticated products being launched in the market, there is an acute need for skilled service personnel at the field level. Key Risk Factors of the Automobile Segment • Correlation with the economy: A slowdown in the economy is a serious concern for the automobile segment as the sales are hugely correlated with the economic activity in the country and purchasing capacity of the customers. For example, the recent economic downturn severely affected the sales of auto OEM’s and sales between September 2008 to December 2008 dropped by about 13%.

Though sales have picked up, such a slowdown may lead to lower investments in infrastructure, which in turn will affect the industry demand. • Increase in input material prices: In the recent past, cost of most of the key raw materials (especially metals) for the Automotive Industry has gone up significantly. Higher steel prices have especially been a key concern (metal prices dropped in early 2009, though now it is improving). The Automotive Industry has tackled rising raw material prices both by passing part of the costs through price hikes and also by optimizing their selling & advertising costs. Higher inflation and increase in fuel prices: Higher inflation and the constantly increasing fuel prices considerably affect the demand for automobiles in the near term, since these directly increase the running cost of vehicles for the customer and thus also have a negative impact on the demand for vehicles.

• Rise in interest rates: Easy availability of low cost finance is one key demand driver for the automobile segment, but the increasing interest rates have a dampening effect on the demand. Low availability of skilled human resources: One of the key areas in the automobile segment where significant gaps exist is the availability of skilled manpower. The problem is not so much in terms of quantity, but more in terms of quality of manpower available. More so, the problem is destined to aggravate going forward considering the kind of growth and development that is foreseen for the Indian automobile segment. Market Shares of Players.

In the Automotive Sector, the Auto OEM’s are all in the organized sector. Key players include Maruti Suzuki India Limited, Tata Motors Limited, Mahindra & Mahindra Limited, Ashok Leyland Limited, Hyundai Motor India Limited, Bajaj Auto Limited, Piaggio Vehicles Pvt Limited, Hero Honda Motors Limited, TVS Motor Company Limited and Honda Motorcycle & Scooter.

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Theory of Environmental Scanning. (2020, Jun 02). Retrieved from https://studymoose.com/theory-of-environmental-scanning-essay

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