FINAL REPORT

BUSINESS POLICY AND STRATEGIC MANAGEMENT

Topic of study:Renaults roadmap for global entry car in India

Submitted to: Prof. N .R. Govinda Sharma

Date: 14th August, 2014

Submitted by:
Team No. - C7
Team Name - Starshine
PGDM Batch: 2013-15

Table of Contents

Group C7

Renault India

Abstract.........................................................................................................................2
Introduction...................................................................................................................2
Strategy used by Renault India Private Limited............................................................3
Importance in Strategic terms......................................................................................4
Details of Strategic Issues.............................................................................................4
Internal and External Analysis (SWOT Analysis)...........................................................5
Strengths (Internal)....................................................................................................5
Weakness (Internal)...................................................................................................6
Opportunities (External)............................................................................................7
Threat (External)........................................................................................................8
Analysis on the Basis Of CPM Model.............................................................................8
Strategic Model...........................................................................................................10
The Five Major Elements of Strategy.......................................................................10
SPACE MATRIX (Strategic Position and Action Evaluation)..........................................13
QSPM (Quantitative Strategic Planning Matrix): A tool for objective assessment of
feasible alternatives....................................................................................................15
Approaches to resolve the Issues...............................................................................17
Financial Analysis and Forecasts:................................................................................17
DU-PONT Analysis of Renault Group...........................................................................18
2014 2016 action plans............................................................................................19
Recommendations for Change in Organisational Structure and Culture:...................20
References..................................................................................................................21

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Renault India

Abstract
Renault India Private Limited is a fully owned subsidiary of Renault S.A.S., France and
currently offers five models in the Indian market the premium sedan Fluence, the luxury
SUV Koleos, the premium compact car, Pulse, the SUV, Duster and the premium sedan,
Scala Renault cars are manufactured in the manufacturing facility located in
Oragadam, Chennai, with a capacity of 480,000 units per annum. Currently, Renault India
also has 130 dealer outlets across the country. Duster today accounts for 86 per cent of
Renault India's production, 81 per cent of its sales and 100 per cent of its exports.
(Dusting off the Competition, 2013) Renault India also exports the Duster to a growing
number of right-hand drive markets. A SWOT analysis has been carried out keeping in
view the view of their present endeavour to their opportunity to enter into the SUV segment
and being successful to capture the market-share of 23 percent within a year in the SUV
segment and their focus on offering of 7-8 models .We have tried to present the SWOT
analysis of Renault taking into consideration their ability to capture a market share of 23
percent in the SUV segment within a year of launch and their strategy to offer 5-6 models
instead of offering 20 different models. (Case Study Renault Duster success story, 2013)
We have tried to present a tentative solution to the challenges using SPACE matrix and
QSPM models by considering the Environmental Stability, Industrial Analysis, Internal
Strength and Financial Strength .We have also recommended some of the changes in the
organizational structure and culture towards the end of this report to help Renault India
overcome these challenges in the long run.

Introduction
Renault India Private Limited is a fully owned subsidiary of Renault S.A.S., France and
currently offers five models in the Indian market the premium sedan Fluence, the luxury
SUV Koleos, the premium compact car, Pulse, the SUV, Duster and the premium sedan,
Scala. Renault India also exports the Duster to a growing number of right-hand drive markets
such as UK, Kenya and other African and Asian countries. (Renault to export India made
Duster to UK market, 2012) Renault cars are manufactured in the manufacturing facility
located in Oragadam, Chennai, with a capacity of 480,000 units per annum. Currently,
Renault India also has 130 dealer outlets across the country. (Renault in India, 2013)
In February 2008, Renault-Nissan Alliance signed Memorandum of Understanding with
Government of Tamil Nadu to set up a manufacturing plant in Oragadam near Chennai
and work on the plant began in June later that year and was completed in a record 21 months.
Renault Design India, the first vehicle design studio set up by a foreign manufacturer in
India, was established in Mumbai in September 2008. The design house is integral to
Renaults success in India as one of its functions is to monitor customer trends and
customise global products for India. (RenaultNissan Alliance, 2014)
In September 2008, Renault India opened its fifth global vehicle design studio in
Mumbai. In March 2010, Renault India and Nissan India opened a production facility in
2

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Renault India

Chennai. Established with an initial investment of Rs 45 billion (US$750 million), the plant
has a combined annual capacity to produce 480,000 vehicles. (Renault-Nissan Alliance:
Success by Integration, 2013) The main idea behind the alliance to have a win-win situation
for both by increasing economies of scale.
As of May 2014, Renault India has 130 dealerships in 16 cities across 9 states and 2 Union
Territories. (Renault India Pvt Limited, 2014)
The rising demand of hybrid and zero emission green cars in India gives a wide opportunity
to Renault as they already a big players in European Electric and hybrid car segments.

Strategy used by Renault India Private Limited

Renault currently has a 43.4 percent (fully voting) stake in Nissan, and Nissan holds a 15
percent (non-voting) stake in Renault effectively giving Renault control. Although more
companies have adopted such an arrangement, it remains controversial. Some business
journalists have speculated that the companies should be joined in a conventional merger
in order to make a "bold" move, (subscription required) while other interested parties
have said that the companies should separate. (RenaultNissan Alliance, 2014)
The goal of the Alliance is to increase economies of scale for both Renault and Nissan
without forcing one company's identity to be consumed by the others. The Alliance
achieves scale and speeds time to market by jointly developing engines, batteries, and
other key components. For instance, Nissans market share increases in Europe's
competitive light commercial vehicle segment have been partly a result of badging
various Renault van models such as the Renault Kangoo/Nissan Kubistar, Renault
Master/Nissan Interstar, and Renault Traffic/Nissan Primastar. In addition, Renault builds
nearly all of the diesel engines in Nissan cars sold in Europe. Nissan uses these engines to
accelerate sales throughout Europe, where it has already become the number one Asian
brand in many key markets. (RenaultNissan Alliance, 2014)
Collaboration between Renault and Nissan also focuses on capital-intensive research
projects such as sustainable, zero-emission transportation and development of
automobile manufacturing in emerging markets such as Brazil, Russia, and India. The
joint R&D centre of Franco-Japanese alliance having a 4,500 engineers. The Alliance also
oversees purchasing for both companies, ensuring larger volume and thus better pricing
with suppliers. Renault and Nissan have also consolidated logistics operations under the
Alliance to reduce costs. The companies claim that they generate more than 200 million
per year by sharing warehouses, containers, shipping crates, seagoing vessels and
customs-related processing. In total, the Alliance reported more than 1.5 billion in
synergies in 2010. (Renault-Nissan Alliance: Success by Integration, 2013)

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Renault India

Japanese manufacturer Nissan Motor Co. Ltd and its alliance partner and French auto
maker Renault SA will stop sharing products in India after the launch of Nissan Terrano
which will share its concept with Renaults hugely popular Duster. (Arundhati & Amrit,
2013)

Importance in Strategic terms

Renault desperately needed a "volume driver" to shore up its operations. It identified a gap in
the SUV segment. "There were SUVs costing Rs. 20 lakh and above manufactured by global
players and those priced from Rs. 6 lakh to Rs. 10 lakh produced by Indian companies. We
saw an opportunity there," says Armelle Guerin, Director, and Product Planning at Renault
India. The company launched the Duster priced between Rs. 8 lakh and Rs. 12 lakh in July
2012.
The Duster took the Indian market by storm. It fuelled the segment of compact SUVs and
grabbed a 23 percent market share within a year. The Duster's success was such that Renault
had to triple production within months of its launch from seven per hour to 20 per hour.
Today, one in three cars produced at the Oragadam plant is a Duster. That is not all. The
Duster today accounts for 86 per cent of Renault India's production, 81 per cent of its sales
and 100 per cent of its exports. (Case Study Renault Duster success story, 2013)
The core-model strategy of Renault India is of having 7-8 models rather than offering a bunch
of cars in India. The company believes if you have to support 20 models of different cars,
then its very difficult to fragment the energy and financial resources of the company
properly .So its better to focus on 7-8 models and making them extremely appealing and
competing in that segments . (Renault India SUV duster Chennai Plant, 2013)

Details of Strategic Issues

A problem for Renault in India has been its inability to find products from its stable that
are appropriate for the Indian market. For instance, the global team had shortlisted the
Clio supermini and the Megane small car for the mass market, but they could just not
meet Indian price parameters. (Dusting off the Competition, 2013)
Renault is facing several challenges on HR front in India like finding the right
competency and to work on its distribution model following the parting of ways with
Hover, its distribution partner. (Souza, 2014)
Renault termination of its pact with Hover Automotive India Pvt Ltd, (its national
distribution and sales firm) ended up with Renault to work on its distribution channel
more precisely.

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Renault India

Internal and External Analysis (SWOT Analysis)

Strengths(Internal)
Strategic Alliance
Global operations
Strong focus
on R&D
Innovators
Opportunities(External)
Positive outlook for
Hybrid and ecofriendly cars
Extend distribution
and service network
Entrant into new
segment

Weaknesses(Internal)
Heavy dependence on
European market
Focused on single
model
Threats(External)

Competition from
existing big players

Strengths (Internal)
1) Strategic alliance
Renault is a France-based automaker, with a presence in all major automobile markets around
the world, barring the US. Nissan is the third largest Japanese automobile company, after
Toyota and Honda. In the late 1990s, Nissan was debt-ridden and making huge losses. The
strategic move behind acquiring debt-ridden Nissan was that Renault very well knowing the
market presence of Nissan and to expand its operations world-wide. They together sell more
than one in ten cars world-wide behind Toyota, General Motors and Volkswagen for
total volume. In 1999, Renault initially acquired 36.8% shares of Nissan and entered
into a strategic alliance with the Japanese company. (Renault-Nissan Alliance: Success by
Integration, 2013) Renault-Nissan become the second global company linked by crossshareholdings and the world fourth lagest automotive group. Their combined vehicles sales
has been increased from 4.9 million units in 1999 to more than 8.26 million units in 2013.
The capital structure of Renault and Nissan, with Renault holding 43.4% (as of 2012) in
Nissan and Nissan holding 15% of Renault , was seen as one of the reasons for the success of
the alliance. On March 17, 2011 the first dedicated Alliance global plant was setup in
oragadam chennai India with a production capacity of up to 400,000 units per year. (The
Renault - Nissan Alliance, 2014)
The Alliance is also the only carmaker to offer a large range of all-electric vehicles.
In 2013, global sales of Alliance vehicles producing zero emissions in use jumped to 66,809
units, up 52% on 2012. The Alliances share of the zero-emission vehicle market reached
63%, including Twizy, Renaults little two-seat city vehicle. (Our alliance with Nissan, 2014)

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Renault India

2) Global Operation
Renault has a global presence including a worldwide distribution system and manufacturing
facilities. The company has industrial and commercial presence in over 118 countries. It has
transform itself from a regional manufacturers to a global company. Its global presence gives
it an edge in technological and designing aspects. The company has a satellite design centres
located in Spain (Barcelona), France (Paris Bastille), South Korea (Seoul), Romania
(Bucharest), Brazil (Sao Paulo) and India (Mumbai). (Our alliance with Nissan, 2014)
3) Strong focus on R&D
Renault is having a world class global standard R&D centre in Mumbai. In October 2011,
an upscale compact car, has been revealed and is scheduled to go on sale in the beginning of
2012. The car was designed by Renault's Design Center in Mumbai and the production was
done in the Alliance's plant in Chennai, which will also manufacture its engine (1.5 dCi, bestin-class for fuel efficiency). (Renault in India, 2013)
Even the very famous Renault Duster got some slight modification from its European
model. The company had adopted 3F strategy- Fast (the adaptation to Indian needs must
happen within 12 months), Frugal (on limited budget) and Fantastic (with no compromise on
quality) and to achieve the 3F objective the modifications was done locally in Renault design
studio in Mumbai. When the car finally hit the market, which is a huge success. The Duster
today accounts for 86 per cent of Renault India's production, 81 per cent of its sales and 100
per cent of its exports. (Dusting off the Competition, 2013)
4) Innovators
After the Logans failure into the Indian market, company went back to its drawing board
to understand the Indian customer. The company at that point of time wants a Volume driver
and they done some surveys and focuses to find out the needs of Indian buyers. The survey
results said that "People loved an SUV with rugged looks that stood out in a crowd, but at
the same time wanted it to operationally perform like a sedan - easy to drive and
[offering] good fuel efficiency and they come up with a new segment of compact SUV. It
grabbed a 23 percent market share within a year of its launch. Renault category innovation
and success not only amazed major and bigger player of Indian market but also forced them
to enter into it. Companies like Hyundai, Maruti Suzuki and Toyota is already working on
their compact SUV model whereas, Ford already enter into the market with its model
EcoSport. (Dusting off the Competition, 2013)

Weakness (Internal)
1) Heavy dependence on European market

Group C7

Renault India

Although Renault has expanded to other international regions, it still depends on the
European market for majority of its revenue. The company generate more than 75 percent of
its revenue from European market. This over-dependence on Europe caused a damping
effect on the companys revenue as recently currency shifts in the Europe leads to the decline
in
Renaults
revenue
by
12%.
Concentrated operations could also
make Renault uncompetitive against
rivals who have globally diversified operations.
(Renault First-Quarter Revenue Falls 12% on European Drop, 2013)
2) Focussed on single Model
In current scenario Renault seems very much focussed on its best-selling model Duster
which accounts for 86% of its production. The other models (Pulse, Scala, Koleos and
Fluence) are not doing well in the market and even these models are unknown by the
potential customers. Even the company neither doing any promotional as well as marketing
activities in this regard.

Opportunities (External)
1) Positive outlook for hybrid and eco-friendly cars
Due to the increasing population, Urbanization and rising living standards the demand of
hybrid and zero emission green cars is going to be rise soon in India. The government of
India, which launched a national plan last year with the goal of getting 6 to 7 million hybrid
and electric vehicles (EVs) on the road by 2020, is already working with the Berkeley Lab
researchers to further analyse their results. (Chao, 2014) Renault already been into
manufacturing of zero emission vehicles for markets outside India. Some of its hybrid
electric vehicles are Fluence Z.E. (a family sedan), Twizy, a tandem-type of urban vehicle,
available in 2 versions (5kW -for drivers without a license, or 15kW), ZOE, an ideal
supermini for commuting to work. So Renault is well positioned to capitalize on the growing
hybrid electric vehicles (HEV) market of India. (Chao, 2014)
2) Extend distribution and servicing network to increase market share
Although Renault has a good presence in Metros and Tier 1 cities but still its lacking in the
Tier 3 and many Tier 2 cities. It has about 100 dealers across the country whereas its
competitors Mahindra has 250 and Maruti Suzuki has 1,206 dealers in India. So, to increase
the sales volume and revenue in market they need to focus in increasing the distributors and
dealership. (Renault Duster overtakes rivals aschallenge looms from Ford EcoSport, 2013)
3) Entrant into new Segment
At present Renault is having its presence in compact SUV segment (Duster), Premium SUV
(Koleos), premium hatchback (Pulse), sedan (Scala) and luxury sedan (Fluence) but still they
can diversify into many others segments. The concept Sedan (sedans with no more than 4m in
length) one of the most emerging segment in Indian automobile industry where Mruti Suzuki

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Renault India

(Swift Dzire), Honda (Amaze), Tata (Indigo CS) and Hyundai (Xcent) having their presence
while Renault completely lacking its product in this category.

Threat (External)
The biggest player of Indian passenger car segment is Maruti Suzuki with a market share of
nearly 47.42% followed by Hyundai Motors with 15.74% share, while Japanese major Honda
is in third position with a market share of 7.66% and Mahindra & Mahindra (7.54%). In the
strong presence of these big players in market there always been a threat for new entrants like
Renault. (June 2014: Indian Car Sales Figures & Analysis, 2014)

Analysis on the Basis Of CPM Model

Renault has strategic alliance with Nissan. The company has 2.01% market share in India and
they are targeting to get 5% market share by 2016. But the competition is one of the major
key to success in Indian automobile market because of large number of players. Maruti
Suzuki is the market leader in the Indian automobile market with 47.42% market share
followed by Hyundai which has 15.74% market share. Except these Honda, Toyota, Tata
Motors and Mahindra are the other major players in the Indian automobile market. So, we
can say that the market is highly competitive. CPM model is been applied to analyse the
competitive advantage for the company. (June 2014: Indian Car Sales Figures & Analysis,
2014)

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Renault India

Superior Quality

Superior
Efficiency

Cometitive
Advantage

Superior
Customer
Responsivene
ss

Superior
Innovation

If we talk about these four parameters of competition in the automobile market in India. Even
though company has only 2.1% market share in India still the Renault Duster was the highest
selling car in C segment in the Indian market. So the company is good at quality and
innovation. Since Maruti Suzuki has the highest number of service centres in India and it is
there core competency because Indian customers are very conscious for after sales services.
So the company should consider this parameter also and plan to develop competitive edge.
Since it has strong base and it is the market leader in Europe, the company can give strong
competition to the players in the Indian automobiles market. The Chinese market is also their
focus because there is the demand of 20 million cars in Chinese market every year and it has

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Renault India

been growing rapidly. So they can frame collaborative strategy for Indian as well as Chinese
market to get the competitive egde.

Strategic Model
The Strategy Diamond Model to solve the issues concerning Renault India:
A Strategy Diamond is a crisp way to analyse, visualize, summarize, and share the strategy
for any product or business.

The Five Major Elements of Strategy

The five key parts of a strategy are: arenas, vehicles, differentiation, staging, and economic
value. By answering key questions in each area, you paint a picture of your strategy with
increasing clarity.
1) Arenas Where will we be active and with how much emphasis?
As far as Indian market is concerned it is highly price sensitive and they look for maximum
value for the money invested with major players like Maruti, Hyundia, Honda, Mahindra,
Tata and Toyota. So If Renault India has to succeed in Indian Market high emphasis has to be
laid on the Manufacturing costs so that the customer gets maximum benefits. It should go
for lean manufacturing and look for operational efficiency. Renault also has to clearly
define where it should concentrate its efforts in - that is to target niche market segment or the
value conscious middle class segment.
Which core technologies?
Renault should focus its R&D in developing in efficient engines for cars as most of the Indian
vehicles are good on mileage which is also the USP of the top manufacturer Maruti Suzuki.
All the Marutis vehicles high success rate is because of the optimum pricing with proper
target markets and also its high emphasis on fuel efficient cars.
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Renault India

Which geographic areas?

Indian geographical area is huge and the consumer preferences also differ across geographies.
Also India has different tax policies in each of its states due to which the cost of the car varies
significantly across the states.
So Renault should clearly define whether its products should be launched across India or to
focus first in certain states and then scale up the distribution network based in the experiences
gained in each geographic area.
Which market segments?
Market segmentation is one of the key areas to focus on while launching as to design cars for
value conscious consumers or to target niche markets.
Most of the Indian vehicles are segmented based on its cost and in Indian market the number
of segments is quite high as compared to other markets. For example, the market leader
Maruti has vehicles priced from Rs. 2,50,000 and has a product at every price points of
Rs.25000 from then on.
Which product categories?
Majority of cars in Indian markets are of hatchbacks and Renault has to define the product
category whether where it needs its maximum resources to focus on.
Some of the major product categories are Hatchbacks, Sedans, Vans, SUV(Sports Utility
Vehicles),MUV(Multi Utility Vehicle).
2) Vehicles How will we get there?
Renault has major plans of expansion in India and there are many strategic options available
through which it can achieve the same.

Acquisitions?
This may be a difficult approach for Renault as India consists of huge market players as far as
automobile sector is concerned. So acquisition may not be a viable option.
Joint ventures?
RenaultNissan Alliance is a strategic Franco-Japanese partnership between automobile
manufacturers Renault, based in Paris, France, and Nissan.
The strategic partnership between Renault and Nissan is not a merger or an acquisition. The
two companies are joined together through a cross-shareholding agreement. The structure
was unique in the auto industry during the 1990s consolidation trend and later served as a
model for General Motors and PSA Peugeot Citron, PSA Peugeot Citron and Mitsubishi, as
well as Volkswagen and Suzuki, though the latter combination failed.

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Renault India

The Renault-Nissan alliance in India is aiming for 90 per cent localization, going ahead. And
it has, in fact, invited vendors to set up shop in Chennai to reduce the logistic cost.

3) Differentiation How will we win?

Customization?
In order to win in the Indian market, Renault has to customize its product to Indian
conditions. It has to spend considerable time understanding the Indian customers need. India
being a developing country, it has to customize its cars for Indian roads and Indian traffic.
It has to make various technical changes to its wheel base, ground clearance suitable for
Indian roads.
Price?
Renault has to get its pricing strategy right to win over the market. It has to differentiate its
features from its nearest competitors and also price close to its rivals in the same segment. It
should not be too premium and also it has to make sure to avoid the cheap vehicle tag.

Product reliability?
Since Renault is comparatively new to the Indian market considering contemporary players
like Maruti and Hyundai it has to make sure their cars are as reliable as Maruti or Hyundai.
Also since it does not have a wide distribution and service coverage it is important to focus
on its product reliability.

4) Staging What will be our speed and sequence of moves?

Speed of expansion?
Following a successful first phase, the group is aiming at capturing more than 8% market
share in Brazil and Russia and 5% in India.
With Nissan exports clocking over one lakh units per annum and Renault's Duster attracting
strong demand from the market, Renault-Nissan Alliance, which was planning to utilize 4
lakh units capacity by 2015, is expected to be ahead of its plans by one year and is planning
to add another 3 lakh units capacity for its entry level cars (Nissan) Datsun (Codenamed K2
and i2) and Renault (A Entry), which will entail an additional investment of Rs 1,500-2,000
crore.
5) Economic logic answers the question, How will we obtain our returns?
Lowest costs through scale advantages?
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Renault India

Through its alliance with Nissin, Renault should try to focus on economies of scale to reduce
costs. As it increases production capacities it has to learn operational efficiency and try to
reduce the cost of manufacturing per unit.

SPACE MATRIX (Strategic Position and Action Evaluation)

SL.
NO
1.

2.
3.

Environmental Stability (ES)

7 of the top 10 companies considered to be technology/product driven,
are from TRIAD markets. BRIC manufacturers not yet perceived as top
technology leaders
Not good pricing strategies of other competitors
Many other players
Total
ES Average

Rating
*
-3

-2
-2
-7
-2.33

(KPMG's Global Automotive Executive Survey 2014, 2014)

SL.
NO
1.

Industry Analysis

2.

A delegation of senior level SIAM (Society of Indian Automobile

Manufacturers) met ministers of Commerce, Road Transport,
Environment and Heavy Industries announced stable policy framework to
ensure sustained growth of the auto industry

Vehicle sales across categories registered an increase of 12.15 per cent to

15,78,884 units from 14,07,875 units in June 2013. (Domestic car sales in
India, 2014)

3.

Rating
*
6

6
protraction of the excise duty cut benefits, new foreign trade policy,
enhanced export incentive for vehicles, streamlined and free inter-state
movement of vehicle (SIAM, 2014)

SL.
NO
1.

Total
IS Average

18
6

Competitive Advantage

Rating
*
-2

Renault reported a marginal increase in its market share in India, mainly

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due to sales of its SUV Duster.

Product life cycle. Renault a Freshness value of 70.46, 27 points above
the market average - (India Auto Report, 2014)
Price offered by Renault was unbeatable
Total
CS Average

2.
3.

Sl.
No
.
1

Renault India

Financial Strength (FS)*

-2
-1
-5
-1.66

Rating*

Renaults revenue was 40932 million (in 2013), down by 8.18%.

Renaults net income was 695 million (in 2013), down by 60%.

Renaults Cash and Cash Equivalents was 836 million (in 2013), down
by 70%. (Finance 2, 2014)
Total

FS Average

1.33

Internal Strategic Positions

Financial

Strength

Competitive

Advantage

+ 1.33 (+6 best to +1 worst)

-1.66 (-1 best

to - 6 worst)

Environmental Stability

-2.33

(-1 best to -6 worst)

Industry

+6

(+6 best to +1 worst)

External Strategic Positions

Stability

Directional Vector Co-ordinates

X-axis :

CA rating + IS rating
= -1.66 + 6 = 4.34

Y-axis :

FS rating + ES rating
= +1.33

+ -2.33 = -1

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Renault India

The Directional Vector falls in the competitive quadrant (lower-right quadrant)

The industry seems to have good growth, Renault has a good growth compared to the
industry standard. It can overcome its internal weakness and maintain its market share.

QSPM (Quantitative Strategic Planning Matrix): A tool for objective

assessment of feasible alternatives
Quantitative Strategic Planning Matrix (QSPM) is a high-level strategic management
approach for evaluating possible strategies. Quantitative Strategic Planning Matrix or a
QSPM provides an analytical method for comparing feasible alternative actions. The QSPM
method falls within Stage 3 of the strategy formulation analytical framework.
When company executives think about what to do, and which way to go, they usually have a
prioritized list of strategies. If they like one strategy over another one, they move it up on the
list. This process is very much intuitive and subjective. The QSPM method introduces some
numbers into this approach making it a little more "expert" technique.
The QSPM method uses inputs from stage 1 analyses, matches them with results from stage 2
analyses, and then decides objectively among alternative strategies.

Key Internal Factors

Weight

15

Strategic Alternatives

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Renault India

Focus on Renault
Duster only as it has
83% market share
in company's sales
AS
TAS
Strength
Strategic Alliance
Global Operation
Focus on R & D
Weaknesses
Heavy dependence on European market
Inability to find products other than Renault
Duster
Subtotal

Focus on all five

brands of Nissan Renault Alliance
AS
TAS

0.2
0.15
0.3

1
1
3

0.2
0.15
0.9

3
2
4

0.6
0.3
1.2

0.2

0.6

0.15
1

0.6
1.85

0.15
2.85

AS

TAS

AS

TAS

0.25

0.25

0.2
0.2

2
-

0.4
-

2
-

0.2
-

0.25
0.1
1

4
1

1
0.1
2.5
4.35

3
2

0.25
0.1
0.8
3.65

Key External Factors

Opportunities
Positive outlook for hybrid and eco friendly cars
Extend distribution and servicing network to
increase market share
Entrant into new segment
Threats
Number of Compertitors
Technological Changes
Subtotal
Grand Total Attractiveness Score
In the above table:-

Relative Attractiveness Scores (AS) are assigned for each alternative & each factor
By attractiveness, we mean the extent to which a strategy option, compared to
the other, enables the firm to either captialise on the strength, improve on the
weakness, exploit an opportunity or avoid the threat
Not attractive = 1
Somewhat attractive = 2
Reasonably attractive = 3
Highly attractive = 4
Weights are assigned to the each factor which has been listed out.
Then the respective AS are multiplied with the weights assigned to that particular
factor to get Total Attractiveness Scores (TAS).
The alternative with the highest TAS is chosen as the best strategy to be implemented.
Here, the alternative Focus on Renault Duster only as it has 83% market share in
company's sales has the higher score which is 4.35. So we choose this Strategy.

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Renault India

Approaches to resolve the Issues

The company has to hire new people with new profile but they must be those who
understand Renaults strategy. Otherwise, they cannot sell the brand and then they
must actually understand the brand itself so that they can understand the marketing
and dealer communication which is a key part of the business will resolve the
challenges on HR front faced by Renault in India.
A cross-functional team is important comprises comprising of the Indian-JapaneseFrench. From global perspective, diversity is a great asset to the organization.
A proper training and motivation to the dealers network staff members and salesman
will help the Renault to provide a better and world class service to its end-users.
To meet the Indian price parameters the Renault have to go more and more for
localization of parts and local assembly in India. The acquisition cost as well as Total
cost of ownership both have to be low to succeed in Indian market and it could only
possible through customizing its European product according to Indian customers
need and market demand.

Financial Analysis and Forecasts:

On February 13, 2014 Carlos Ghosn, Chairman and CEO of Renault draw a mid-term
conclusion of Renault strategic plan. Renault exceeded its 2011-2013 objective and delivered
2.5 billion in cumulative free cash flow. The group has set new ambitious yet realistic
targets to be reached by the end of the plan Drive the Change to be measured in 2017:
To generate 50 billion euros in consolidated turnover
To reach an operating margin greater than 5% of turnover with a positive free cash flow
each year.
The Renault group increased its market share outside Europe. The mix of non-European sales
increased from 38% in 2010 to 50% in 2013. Brazil and Russia became respectively the
second and third largest markets for the company. Led by Duster, the companys most-sold
vehicle in 2013, the unique M0 range has been the driving force behind the strong growth in
emerging markets.

17

Group C7

Renault India

DU-PONT Analysis of Renault Group

RETURN
ON
EQUITY
3.07%
Return on
Assets
0.935%

Assets/Equity =
74992/22837
=3.28

Net
Operating
Margin
1.70%

Total
Assets
Turnove
r 0.55

Net
Income
695 Mn

Sales
40932
Mn

Sales
40932
Mn

Sales
40932 Mn

Total Assets
74992 Mn

Fixed
Assets
32321
Mn

Total
Costs
40237
Mn

Current
Assets
42861
Mn

Du-Pont Analysis
A method of performance measurement that was started by the DuPont Corporation in the
1920s. With this method, assets are measured at their gross book value rather than at net book
value in order to produce a higher return on equity (ROE). It is also known as "DuPont
identity".Du-Pont analysis considers Return on Assets and Return on Equity
Return on Assets=Profit Margin* Total Assets Turnover
=Net Income/Sales*Sales/Total Assets
=1.70*0.55
=0.935 %
Return on Equity =0.935%*3.28
=3.07%
18

Group C7

Renault India

Or
ROE=Profit Margin*Total Assets Turnover*Equity Multiplier
=Net Income/Sales*Sales/Total Assets*Total Assets/Common Equity
=1.70*0.55*3.28
=3.07%
Inferences.
Renault Group earns a return on Capital Invested at 3.07% The Group has a fair operating
margin of 1.07% which is fair .The Net-Operating Margin is low due to the high Operating
expenses. As far as Assets Turnover is concerned, it is below 1 due to high operating cost.
However, the Return on Equity is high at 3.28 which improves the Return on Capital
Employed.
Additional Financial Details
Group revenues were 40,932 million, up 0.5% from 2012, on 3.1% higher sales. The
Automotive divisions operating margin was 495 million, up from 34 million in 2012,
contributing to a Group operating margin of 1,242 million (3.0% of revenues), compared
with 782 million (1.9% of revenues) in 2012. Operational free cash flow of the automotive
division was a positive 827 million (including a positive contribution from a change in the
working capital requirement of 790 million. (Annual Report 2013, 2014)

2014 2016 action plans

1) A sustained renewal and expansion of the product line-up
The Renault group is going to accelerate the renewal and expansion of its product line-up
starting in the fall of 2014 with the launch of an all-new Twingo and Traffic van. These will
be followed by the successors of Espace, Megane, Scenic and a new D sedan which will all
share the new alliance 3 million CMF C-D platforms.
Simultaneously, the group is going to extend its market coverage with a complete line-up of
cross-over vehicles, an A-entry vehicle designed for India and South America as well as new
pick-up trucks for emerging markets.
2) International expansion and renewed growth in Europe
Following a successful first phase, the group is aiming at capturing more than 8% market
share in Brazil and Russia and 5% in India. China will become a top priority in the coming
years with the construction of a new plant in Wuhan with an initial capacity of 150,000 units,
designed to produce C and D segment cross-overs.
The Renault group will enjoy the benefits of scale and improved competitiveness as a
result of sharing alliance platforms and modules (CMF) on which more than 80% of future
vehicles will be based. Standardized modules will account for two thirds of the value of
future vehicles, up from one third today.

19

Group C7

Renault India

The localization of parts and components will increase in order to make better use of the
companys global manufacturing footprint and contain costs. During the period, the company
will also benefit from the effects of the competitiveness plans signed in France and Spain as
well as manufacturing vehicles for partners. By completion of the plan, the group will reach a
capacity utilization rate of 100% in Europe (based on 2 shifts/day standard definition).
3)

Alliance synergies:

Increase synergies from the Alliance will contribute to improving Renaults profitability. The
convergence projects recently announced in purchasing, engineering, manufacturing and
supply chain, and human resources will generate a minimum of 4.3 billion by the end of
2016.
4) Cost containment
The strategy of sharing costs across the Alliance and with partners will allow Renault to
sustain a high level of upstream development, while maintaining a ratio of R&D and CAPEX
below 9% of group turnover.

Action plans to deliver two critical objectives:

By the end of the plan, the Renault group aims to deliver two critical objectives:
Deliver 50 billion [2] in consolidated group turnover at the current scope of
consolidation. Group turnover includes sales of vehicles and parts, associated services
and business with partners.
Deliver a sustained level of profitability by achieving an operating profit margin of at
least 5% of group turnover, while achieving a positive free cash flow each year.

Recommendations for Change in Organisational Structure and Culture:

As Renault India grows and expands across new geographies globally, a cross-cultural
Intelligence Programme will have to be conducted to help create a multi-cultural work
environment. An Employee Induction Centre will have to be conceptualised, designed &
constructed, and operations commenced to impart compulsory induction and product
training to all new recruits. A number of innovative training methodologies and tools will
be used in the centre. Training programmes have to be streamlined focussed on creating
and increasing effectiveness of the value chain. The induction programmes have to be
developed on the basis of job knowledge and skills.
The core-model strategy of Renault India is of having 7-8 models rather than offering a

bunch of cars in India is not working well as beside its Duster none of the models are
getting customer in large numbers. Even its Duster which accounts for 86% of its
production and 81% of its domestic sales has been seen a decline of 15.6% with Year-on-

20

Group C7

Renault India

year movement with 3816 units sold out in June-14 (June 2014 : Indian Car Sales
Figures & Analysis, 2014) If we see the sales figure of others models of Renault than we
find out that its Fluence in June-14 having a sales decline of 87% with comparison to
June-13 sales, Pulse sales decline of 59.6% and Scala with a sales decline of 70.7%.
Overall sales decline of the company is by 27-28% which is a matter of concern for
Renault. The company have to come up with better marketing and positioning strategies
for its vehicles. More focus on R&D is needed to be done to repeat the success like
Duster. Even its not a long term beneficial strategy to focus just on one model which
Renault presently doing, which results to the suffering of its other models.
51% of Indian passenger car market is of Hatchback and we see the present scenario
of Renault its having only a single Model Pulse in this segment and that too not doing
well, if we see the sales figure of Pulse 201 cars is been sold in June-14 with a decline of
59.6% in comparison to last year sales. Renault needs to focus much in Pulse.

21

Group C7

Renault India

References
A. R., & A. R. (2013, July 15). Renault, Nissan decide to stop sharing auto models in
India. Retrieved from Livemint:
http://www.livemint.com/Industry/LA6kcyDIoiuZwhGGmRbKTI/Renault-Nissandecide-to-stop-sharing-auto-models-in-India.html
Annual Report 2013. (2014, June). Retrieved from renault:
http://group.renault.com/wp-content/uploads/2014/06/rapport-annuel20131.pdf
Case Study Renault Duster success story. (2013, October 27). Retrieved from
Business Today: http://businesstoday.intoday.in/story/case-study-renaultduster-success-story/1/199321.html
Chao, J. (2014, March 31). Hybrid vehicles more fuel efficient in India, China than in
U.S. Retrieved from NewsCentre: http://newscenter.lbl.gov/2014/03/31/hybridvehicles-more-fuel-efficient-in-india-china/
Domestic car sales in India. (2014, June). Retrieved from ndtv:
http://auto.ndtv.com/news/domestic-car-sales-in-india-up-by-14-76-in-june2014-585807
Dusting off the Competition. (2013, October 27). Retrieved from Business Today:
http://businesstoday.intoday.in/story/case-study-renault-duster-successstory/1/199321.html
Dusting off the Competition. (2013, October 27). Retrieved from Business Today:
http://businesstoday.intoday.in/story/case-study-renault-duster-successstory/1/199321.html
Finance 2. (2014, June). Retrieved from Renault: http://group.renault.com/en/finance2/
India Auto Report. (2014, June). Retrieved from india auto report:
http://indiaautoreport.com/acting-fresh/#sthash.Cd4lpTic.dpuf
June 2014 : Indian Car Sales Figures & Analysis. (2014, july 11). Retrieved from teambhp: http://www.team-bhp.com/forum/indian-car-scene/152979-june-2014indian-car-sales-figures-analysis.html
June 2014: Indian Car Sales Figures & Analysis. (2014, June). Retrieved from teambhp: http://www.team-bhp.com/forum/indian-car-scene/152979-june-2014indian-car-sales-figures-analysis.html
KPMG's Global Automotive Executive Survey 2014. (2014, june). Retrieved from
kpmg:
http://www.kpmg.com/CZ/cs/IssuesAndInsights/ArticlesPublications/Pressreleases/Documents/KPMG-Global-automotive-executive-survey-2014.pdf
Maruti boosts passenger vehicle market share to 42% in FY14. (2014). Retrieved
from Business Standard.

22

Group C7

Renault India

Our alliance with Nissan. (2014). Retrieved from renault.com:

http://group.renault.com/en/our-company/a-group-an-alliance-andpartnerships/our-alliance-with-nissan/
PTI. (2014, April 11). Maruti boosts passenger vehicle market share to 42% in FY14.
Retrieved from Business Standard: http://www.businessstandard.com/article/companies/maruti-boosts-passenger-vehicle-marketshare-to-42-in-fy14-114041100654_1.html
Renault Duster overtakes rivals aschallenge looms from Ford EcoSport. (2013, June
4). Retrieved from Livemint:
http://www.livemint.com/Industry/TulRbd7QUMyDYVcxyAO74L/Renault-Indiahits-sweet-spot-with-DusterEcoSport-maypose.html
Renault First-Quarter Revenue Falls 12% on European Drop. (2013, April 25).
Retrieved from Bloomberg: http://www.bloomberg.com/news/2013-0424/renault-first-quarter-revenue-falls-12-on-european-drop.html
Renault in India. (2013). Retrieved from Renault:
http://www.renault.com/en/groupe/renault-dans-le-monde/pages/renault-eninde.aspx
Renault India Pvt Limited. (2014). Retrieved from Wikipedia:
http://en.wikipedia.org/wiki/Renault_India_Private_Limited
Renault India SUV duster Chennai Plant. (2013, June 13). Retrieved from Economic
Times: http://articles.economictimes.indiatimes.com/2013-0613/news/39952487_1_renault-india-suv-duster-chennai-plant
Renault to export India made Duster to UK market. (2012, November 16). Retrieved
from business-standard: http://www.businessstandard.com/article/companies/renault-to-export-india-made-duster-to-ukmarket-112111600131_1.html
RenaultNissan Alliance. (2014). Retrieved from Wikipedia:
http://en.wikipedia.org/wiki/Renault%E2%80%93Nissan_Alliance
Renault-Nissan Alliance: Success by Integration. (2013). Retrieved from IBS Center
for Management Research:
http://www.icmrindia.org/casestudies/catalogue/Business
%20Strategy/Renault-Nissan%20Alliance-Case.htm
SIAM. (2014, June). Retrieved from ndtv: http://auto.ndtv.com/news/siam-briefs-newministers-about-auto-industry-s-current-situation-and-potential-525218
Souza, B. d. (2014, June 23). My aim is to hire and maximise local talent.'. Retrieved
from Autocar Professional: http://www.autocarpro.in/interview/-aim-hiremaximise-local-talent-5872
Strategie. (n.d.). Retrieved from Renault:
http://www.renault.com/en/groupe/strategie/pages/strategie.aspx
The Renault - Nissan Alliance. (2014). Retrieved from Renault:
http://www.renault.com/en/groupe/l-alliance-renault-nissan/pages/l-alliancerenault-nissan.aspx

23

Group C7

Renault India

24

Group C7

Sl
No
1
2
3
4

Renault India

Criteria for evaluation

Clear definition of the issue
Application of tools and frameworks for resolving
the issue and arriving at strategies
Quality of strategic alternatives arrived at
Selection of appropriate strategy and suggestions
for implementation of strategy (including control
tools such as BSC, organisational change)
Quality of referencing
Pl note that referencing is extremely important for an
objective study. The quality of articles referred should be
very good.
There is a world of knowledge beyond the internet!
Total

25

Max
marks
3
3

Marks
obtained
2.5
2.5

3
3

2.5
2.5

2.5

15 12.5