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The Indian Automobile Industry embarked on a new journey since 1991 with deli censing of the sector and subsequent opening up for 100 per cent FDI through automatic route. Almost all the global majors have set up their facilities in India taking the next level of production of vehicles from 2 million in 1991 to 110+ million in 2011.
Demand is linked to economic growth and rise in income levels. Per capita penetration at around nine cars per thousand people is among the lowest in the world (including other developing economies like Pakistan in segments like cars). While the industry is highly capital intensive in nature in case of four-wheelers, capital intensity is a lot less for two-wheelers. Though three-wheelers and tractors have low barriers to entry in terms of technology, four wheelers is technology intensive. Costs involved in branding, distribution network and spare parts availability increase entry barriers. With the Indian market moving towards complying with global standards, capital expenditure will rise to take into account future safety regulations. As compared to their global counterparts, both the two-wheeler as well as four wheeler segments are relatively lesser fragmented. However, things are changing, especially on the passenger cars front as many foreign majors are eyeing the Indian market. As a result, pricing power is likely to diminish going forward. Automobile majors increase profitability by selling more units. As number of units sold increases, average cost of selling an incremental unit comes down. This is because the industry has a high fixed cost component. This is the key reason why operating efficiency through increased localization of components and maximizing output per employee is of significance. FACTS: Largest three wheeler market in the world 2nd largest two wheeler market in the world 7th largest passenger car market in Asia & 10th Largest in the world 4th largest tractor market in the world 5th largest commercial vehicle market in the world 5th largest bus & truck market in the world
(2005-06 to 2011-12)
Total vehicle sales in mn units
1,000,000 800,000 600,000 400,000 200,000 0 Commercial vehicles
Commercial vehicles
2005-06
2006-07
2007-08
2008-09
2009-10 2010-11
2010-11 2011-12
two wheelers
15,000,000 10,000,000 5,000,000 0
Three wheelers
2005-06
2006-07
2007-08
2008-09
2009-10
2011-12
CUMMINS INDIA
Tata Cummins Limited, (Jamshedpur) was formed between Cummins Inc. a Tata Motors in 1993 to produce mid-range engines for Tata Motors' commercial vehicles. Product launches- E B series and ISB electronic engines for the commercial vehicle, power generation and industrial markets. Achievements- vegetable oil has been uses as an input to generators and running of rice mills from locally available pomgania seeds in Padarwadi village, which is situated near pune. BEST PRACTICES- For on time payment of supplier Company focuses on national electronic transfer.
SCOOTERS INDIA
Products-Vikram 450D, Vikram 410G, Vikram 600G, Vikram 750D, Vikram 750D (WC), Vikram
EV.
Achievements- Got Distinction of developing first zero pollution electric three wheelers in the
world.
Best practices- Their laboratories are Equipped with Computer Aided Design (CAD lab),
Advanced Instrumentation, testing rigs prototype manufacturing facilities and internet.
LML
LML was launched in 1993 with a joint venture with Piaggio. PRODUCTS - Retro look STAR (200 CC SCOOTER)based px150,FREEDO(100cc bike)
LML BEAMER 150 150cc, Manual, Petrol, 50 kmpl, Freedom Prima
Acheivments-In 2000 Recognized by the Ministry of Science and Technology, for remarkable success
in introducing upgrades of scooters in the market with more fuel-efficient engines.
KINETIC MOTORS
Product launches -Kinetic Nova 135, a 135 cc gearless scooter Awards and achievements- Confident about KEL's technical capability, TML has selected KEL
to supply transmission gears & shafts for the prestigious Nano car.
Achievements- Awarded as the most promising sme Auto and engineering by cnbc-tv 18 icici
emerging India awards.
Best practices- This year they have reduced energy consumption per vehicle by 13.29
%.
TATA MOTORS
Tata Motors operates through three business segments: Jaguar Land Rover; Tata vehicles, spares, and financing; and other operations.
ACHIEVEMENT-Tata Motors has received the prestigious Golden Peacock Award, for Excellence
Corporate Governance for 2011.
PRODUCT LAUNCHES - Tata Prima Cons truck, Tata Nano, Light commercial
vehicles.
MARUTI SUZUKI
Maruti Suzuki India (MSIL or 'the company'), a subsidiary of Suzuki Motor Corporation, manufactures and distributes motor vehicles and spare parts.
Founded in 1945, with growth into a US $15.4 billion multinational group with more than
144,000 employees in over 100 countries across the globe.
PRODUCT
LAUNCHES-
SsangYong
Rexton,
Mahindra
Reva
NXR
Verito
Duro,XUV500,Scorpio.
TVS
TVS Motor Company is the third largest two-wheeler manufacturer in India and one of the top ten companies in the world.
PRODUCTS- Motorcycles (Apache RTR 180, Flame DS 125, Flame, TVS Jive, StaR City,
Sports) Variomatic Scooters (TVS Wego, Scooty Streak, Scooty Pep+, Scooty Teenz) Mopeds (TVS XL Super, TVS XL Heavy Duty)
AWARDS- The 'Good Advertising' award by Auto India Best Brand Awards
2009.
ACHIVEMENTS- 1980: TVS launched moped TVS 50 which was the country's first 500cc two
seater. 1984: It was the first mover to introduce 100cc indo-Japanese motorcycle.
BEST PRACTICES- 85% recyclable parts: 85% of all TVS vehicles are completely
recyclable.
INNOVATION- Electric Scooty (Scooty Teens EV): It is pure electric vehicle,Wego: It was the
first scooty with body balance technology, Jive: In 2009-2010 TVS launched an auto clutch bike which comes with auto adjusting gear box i.e. while in gearing up and down there is no need to pull the clutch.
PRODUCT-
Hunk, Maestro,splender.
karizma,
KarizmaR,
Karizma
ZMR
FI,
Ignitor,
AWARDS- CNBC AWAAZ AWARD: IN 2011 Hero MotoCorp was awarded for "Effective
rebranding of a new corporate entity" by CNBC Awaaz Consumer Awards.
ACHIVEMENTS- In 1984 Hero Honda motors ltd was incorporated. It had a joint venture
with a Japanese company called Honda motor co ltd.
BAJAJ AUTO
The Bajaj Group was founded in 1926 by Jaman Lal Bajaj; it is amongst the top 10 business houses in India, ranked as the world's fourth largest two- and three- wheeler manufacturer
PRODUCTS- Bajaj Platina ,Bajaj pulsar, Discover DTSi AWARDS- In 2009 -2010:Bajaj auto was awarded for most trusted brand by Brand equity. ACHIEVEMENTS -In March 2010 Bajaj auto achieves the Bharat stage III norm Compliance for
its range of product. It was the first company to do so.
ASHOK LEYLAND
Ashok Leyland was founded in 1948. It is the second largest commercial vehicle manufacturing company in India in the medium and heavy vehicle.
PRODUCTS-Buses-city bus, sub -urban bus, intercity bus, optare bus,Trucks -Long haul
trucks.
BOSCH GROUP
The Bosch Group is a leading global supplier of technology and services. According to the latest figures (as of January 2012), about 302,519 associates generated sales of 51.5 billion euros in the areas of automotive and industrial technology, consumer goods, and building technology
OUTSTANDING ACHIEVEMENTS
Bosch Builds World-class Competence Center for Automotive Technology PRODUCT LAUNCHES 1) Bosch and Siemens Home Appliances Group (BSH), largest manufacturer of home
Appliances in Europe announced the launch of Bosch home appliances in India 2) Bosch is going to launch new power tools like Milwaukee Tool and products Concrete,
INNOVATION
1)Bosch have patents worldwide 2)It has innovation portal for everyone one such community Birds of a Feather Innovation Leaders (BOF)
BEST PRACTICES
1) Bosch domain expertise with SAP best practices 2) Implementation using pre-configured solutions 3) Cost optimization by using fixed scope and time basis 4)Ready-to-use process catalogues 5) Strong and well tested quality gates
KAR MOBILES
Production of quality valves for internal combustion engines commenced in 1974 Technical Collaboration with TRW Inc, USA Global excellence in product and process technologies Preferred supplier
OUTSTANDING ACHIEVEMTS
1) First First Indian company to become a vendor partner to General Motors 2) KML has 2 world class manufacturing plants in Bangalore & Tumkur
PRODUCT LAUNCHES
New heavy duty engine and automotive engines are launched
INNOVATION
State of the art management Systems PRACTISE 1) Governance is based on principles of integrity, transparency and fairness
Employee behavior is nourished 2) In this culture it is governed through a policy document "Ethical Standards of Behavior" that regulates employees and directors
Analysis of companies
1) The report contains data from 15 companies belonging to automobile sector. These include auto component manufacturers , two wheelers, three wheelers ,four wheelers and Commercial vehicle makers. The list of the companies is mention below. Tata motors, Mahindra and Mahindra, Maruti Suzuki, force motors, Hindustan motors, kinetic motors, Bajaj auto, Ashok Leyland, tvs motors, Cummins India ltd, Kar mobiles, LmL, Atul auto , Hero motors corp and Scooters India Ltd. 2) The companies have been devided into three groups based on their return on capital employed. The criteria sset for the devision is described below. High performing Roce >20 10<= roce<=20 roce<10
Tests of Normality Kolmogorov-Smirnova group npm HIGH PERFORMING MEDIUM PERFORMING LOW PERFORMING Statistic .275 .355 .305 df 6 4 5 Sig. .173 . .144 Statistic .866 .807 .882 Shapiro-Wilk df 6 4 5 Sig. .210 .116 .318
Tests of Normality Kolmogorov-Smirnov group npm HIGH PERFORMING MEDIUM PERFORMING LOW PERFORMING a. Lilliefors Significance Correction Statistic .275 .355 .305 df 6 4 5
a
Null hypothesis( p value>0.05)- The data is normally distributed Alternate hypothesis(P value <=0.05) - data is not normally distributed From the P values derived through Shapiro-wilk test we can conclude that the data is normally distributed as p values for NPM( net profit margin ) for high performing , medium performing and low performing companies is greater than the sig value of 0.05, Hence the null hypothesis is accepted .
Tests of Normality Kolmogorov-Smirnova group nom HIGH PERFORMING MEDIUM PERFORMING LOW PERFORMING ronw HIGH PERFORMING MEDIUM PERFORMING LOW PERFORMING assettover HIGH PERFORMING MEDIUM PERFORMING LOW PERFORMING a. Lilliefors Significance Correction Statistic .197 .377 .268 .315 .320 .276 .245 .243 .351 df 6 4 5 6 4 5 6 4 5 Sig. .200* . .200
*
Shapiro-Wilk Statistic .919 .773 .898 .802 .815 .896 .859 .923 .756 df 6 4 5 6 4 5 6 4 5 Sig. .501 .061 .398 .061 .133 .388 .185 .552 .034
.063 . .200
*
.200* . .043
Tests of Normality Kolmogorov-Smirnov group nom HIGH PERFORMING MEDIUM PERFORMING LOW PERFORMING ronw HIGH PERFORMING MEDIUM PERFORMING LOW PERFORMING assettover HIGH PERFORMING MEDIUM PERFORMING LOW PERFORMING *. This is a lower bound of the true significance. Statistic .197 .377 .268 .315 .320 .276 .245 .243 .351 df 6 4 5 6 4 5 6 4 5
a
Shapiro-Wilk Statistic
*
Sig. .200
df 6 4 5 6 4 5 6 4 5
Sig. .501 .061 .398 .061 .133 .388 .185 .552 .034
. .200
*
. .043
Similarly Data For NOM( Net operating margin) , RONW( return on net worth and asset turn overatio I net worth s normally distributed as the sig values are greater than 0.05. Hence Data is normally distributed .But in case of asset turn over the low performing group has significance value less than 0.05 that show the data is not normally distributed and their high variation in the asset turnover ratios of low performing companies.
Test of Homogeneity of Variances Levene Statistic npm nom ronw assettover roce 1.666 .341 1.849 2.843 2.462 df1 2 2 2 2 2 df2 12 12 12 12 12 Sig. .230 .718 .200 .098 .127
Null Hypothesis ( p value> 0.05) There is homogeneity in variance among the group. Alternate hypothesis (p value <=0.05) There is no homogeneity in variance among the groups
The p values of npm , nom , ronw and asset turnover ratio are greater than the significance level of p=0.05 hence we can conclude that Null hypothesis is accepted and their is no significant evidence that their is difference in variance among groups for each factor ie npm ,nom,ronw,roce and asset turnover ratio
F statistic test to check difference in group means for each of the five variables.
ANOVA Sum of Squares npm Between Groups Within Groups Total nom Between Groups Within Groups Total ronw Between Groups Within Groups Total assettover Between Groups Within Groups Total roce Between Groups Within Groups Total 151.245 158.958 310.203 145.448 178.817 324.265 3603.695 3116.129 6719.823 4.078 28.734 32.812 3076.617 3081.422 6158.039 df 2 12 14 2 12 14 2 12 14 2 12 14 2 12 14 1538.309 256.785 5.991 .016 2.039 2.394 .852 .451 1801.847 259.677 6.939 .010 72.724 14.901 4.880 .028 Mean Square 75.623 13.247 F 5.709 Sig. .018
Null hypothesis- Their is no significant difference in group means Alternate hypothesis- Their is significant difference in group means
The f static values signifies whether or not the group means for each of the five factors are equal or not , if the significant values of statistic is less than 0.05 that means null hypothesis conveying group means are equal is rejected . if f statistic value is greater than0.05 than the null hypothesis is accepted which means their is no significant difference in group means for that that particular factor and hence all values belonging to the three groups do not differ significantly.. We will reject such factor in further analysys. From the table above we can see that the f statistic significant value for roce, npm, nop, roce is less than 0.05 significance level , hence we conclude that their is difference in means between the groups of each of these respective factors.
The f statistic significance value of asset turn over ratio is 0.45 which is greater than the significance level of 0.05 , hence the group means for this factor are equal and hence the factor is insignificant in determining low performing , high performing and medium performing companies..
Turkey Hsd test to determine groups for each factor that are causing differences in performance.
Tukey HSD Depen dent Variabl e npm (I) group HIGH PERFORMING (J) group MEDIUM PERFORMING LOW PERFORMING MEDIUM PERFORMING HIGH PERFORMING LOW PERFORMING LOW PERFORMING HIGH PERFORMING MEDIUM PERFORMING nom HIGH PERFORMING MEDIUM PERFORMING LOW PERFORMING MEDIUM PERFORMING HIGH PERFORMING LOW PERFORMING LOW PERFORMING HIGH PERFORMING MEDIUM PERFORMING roce HIGH PERFORMING MEDIUM PERFORMING LOW PERFORMING MEDIUM PERFORMING HIGH PERFORMING LOW PERFORMING LOW PERFORMING HIGH PERFORMING MEDIUM PERFORMING ronw HIGH PERFORMING MEDIUM PERFORMING LOW PERFORMING MEDIUM PERFORMING HIGH PERFORMING LOW PERFORMING LOW PERFORMING HIGH PERFORMING MEDIUM PERFORMING Mean Difference (I-J) 1.27167 7.15767* -1.27167 5.88600 -7.15767* -5.88600 1.66917 7.11967
*
Sig. .853 .018 .853 .078 .018 .078 .785 .026 .785 .131 .026 .131 .150 .013 .150 .515 .013 .515 .253 .008 .253 .229 .008 .229
-18.86700
LOW PERFORMING
For the factors (NPM,NOP,RONWa and ROCE) The significant values for difference in means (between high performing and low performing)is less than the significant value of 0.05 . This shows that the above mentioned groups have significant difference between them and strongly affect the performance of companies. It is also observed that that the Significant values for mean difference between (medium and high performing, medium and low performing) companies has a significant p value greater than 0.05. This concludes that there is no evidence that there is significant difference in means when medium performing group is compared with other 2 groups. In case of asset turnover ratio , there is no significant difference in means of groups as the significant values are greater than 0.05 , hence asset turnover ratio is not a dominant factor in grouping the companies into 3 groups.
Wilks' Lambda Test of Functio n(s) 1 through 2 2 .822 2.056 3 .561 .323 11.853 8 .158 Wilks' Lambda Chisquare df Sig.
The wilks lamda significant value for function 1 is 0.158 compared to significant value of function 2 which is 0.326. Hence we can conclude that that function 1 has a better discriminating ability to classify companies into different groups In other words function 1 is a better model than function 2.The table below gives the canonical discriminant scores for each variable and hence we can derive the discriminate function equation for each function.
Standardized Canonical Discriminant Function Coefficients Function 1 npm -.093 .231 1.25 9 assett over 2 1.37 2 .387 1.84 9 .954
nom ronw
-.607
From the coefficients derived through discriminant analysis we can conclude that in function 1 ronw has higher discriminating ability than any other variables and in function 2 ronw and npm have higher discriminating ability. A unit increase in ronw in function 1 can cause increase of 1.259 in the discriminate score of function 1 .similarly in function 2 a unit increase in ronw can decrease the Discriminate score by 1.8489 and a unit increase in npm can increase the score by 1.372.
Canonical Discriminant Function Coefficients(unstandardized) Function 1 npm nom ronw assettover (Constant) -.025 .060 .078 -.392 -.520 2 .377 .100 -.115 .617 -2.333
By using the above table we get two equations for discriminant scores Function 1 score=-0.520 -0.025*npm +0.060*nom +0.078*ronw -0.392*asset turnover ratio Function 2 score=-2.33 +0.377*npm +0.100*nom -0.115*ronw + 0.617*asset turn over ratio
Cutt off score The cut off score will help us in predicting that any new company taken will fall in which of the three categories by using the unstandardized discriminant equations as mentioned above. The cut of scores are mention in the group centroid table given below.
Functions at Group Centroids Function group HIGH PERFORMING MEDIUM PERFORMING LOW PERFORMING 1 1.180 .011 -1.425 2 -.254 .690 -.248
A close to 1.80
B close -2.54
0.011
0.690
Medium performing
1.425
-0.248
Low performing
Company Tata motors Mahindra and mahindra maruti Suzuki HINDUSTAN MOTORS Force motors Bosch Kar mobiles cummins india ltd scooters india ltd Atul motors Hero motors LML Ashok Leyland TVS Motors Kinetic motors
group old 1 3 3 3 1 1 2 2 3 2 1 3 2 1 1
predicted group 2 2 3 3 1 1 2 2 3 3 1 3 1 1 1
Conclusion -By Analyzing the above table we can conclude that 73.6 companies have correctly by
the model and remain 26.4 % have classified into different groups they belong to different groups than their original ones.Tata motors which was a high performing company has been predicted as a medium performing company by the model. Similarly Mahindra and Mahindra has been categorized into medium performing from low performing Previously .Ashok Leyland has moved from a medium performer to a high performer category. In the next step the classification of companies has been done on the basis of predicted group member ship and the data for all the five factors is taken for financial year 2011-2012. Hence we find that how many companies in the year 2011-12 have changed their group membership compared to membership in year 2002-03 .
Predicted Group Membership For the year 2011-12 using Pedicted classification of the year 2002-03
company group membership in 2002-03 2 2 3 3 1 1 2 2 3 3 1 3 1 1 1 Predicted group membership in 2011-12 2 2 2 3 1 2 2 2 3 3 1 2 2 2 1
Tata motors Mahindra and mahindra maruti Suzuki HINDUSTAN MOTORS Force motors Bosch Kar mobiles cummins india ltd scooters india ltd Atul motors Hero motors LML Ashok Leyland TVS Motors Kinetic motors
Above above table shows that 60% % companies have been classified correctly and the remaining 40% have shifted to other groups.
Conclusion -Out of a total of 6 companies belonging to high performing group 3 companies( bosh ,
Ashok Leyland and Tvs motors) )have shifted to medium performing group and the remaining 3 companies( kinetic motors ,hero motors, force motors ) have retained their status as high performing. .From among 4 companies belonging to average performing group none have shifted to any other group .Out of 5 companies belonging to low performing group ,2 Companies (Maruti Suzuki and LML) have shifted to average performing group ) The remaining companies ie atul auto , scooters india Ltd and Hindustan motors have shown no improvement in performance are are still poor performing.