January 10th, 2018
Strategies for Volkswagen to Better its Market Share in India
Analysis of the competitive market in line with the porter’s five forces could help elucidate the actions the company can take to better its marketing strategy. The strategy adopted should address the different opportunities and threats that the entity’s external environment presents (Dagmar Recklies 1). Among the threats for Volkswagen’s business in India substitutes such as motorcycles feature prominently. Unlike the car industry, the motorcycle industry main players’ are based in the Asian continent thus can avail cheap alternatives to the population that cannot afford to purchase cars (Ohara and Sato 4). The importance of this perhaps informs Volkswagen’s purchase of a minority share holding in Suzuki whose experience in both the motorcycle industry and in small cars manufacture could be help the European automotive giant increase its Indian market share (Patankar 1). Through such a strategy the company could influence the substitute market internally in favour of its automotive sector (Dagmar Recklies 5). The railway industry would also impact on the entity’s passenger automobile brands popularity in the market. For this substitute; what would better prevent the threat would be accentuating the differences in the products such as pricing and fuel efficiency (Dagmar Recklies 5).
Perhaps the threat that would have the least influence on Volkswagen Indian market would be the threat of new entrants. Already the market plays host to many other automotive companies with Suzuki being the main market player (Baggonkar 1). As such new entrants would be faced with the barrier of establishing adequate technological, production and distribution infrastructure to rival those of existing players. Such also would be hampered by the high costs that are involved in set up of a production unit. To increase the barriers for new entrants the company could use marketing activities to establish its brand, create alliances with suppliers and increasing its distributor coverage thus availing its products in regions where new entrants do not reach (Dagmar Recklies 5).
Another force that influences the company’s strategy in India is the supplier bargaining power. The company’s choice of production site to be in Pune region has partly been identified to have been driven by this factor (Dettmann as qtd in Volkswagen, “driving ideas” 25). However, companies that have established their production units in India (e.g. Tata and Suzuki) could have established partnerships with existing distributors thus curtailing the degree to which the company is able to partner with suppliers. To counter such alignments the company could leverage its strengths in other markets and import parts that can then be fully assembled in the Indian markets (Dagmar Recklies 5). Such however would be affected by aspects such as importation costs and loss of reputation as a home manufacturer.
Buyers bargaining power also affects the company’s marketing strategy. It is out of such realization that Volkswagen’s strategy is to manufacture vehicles with market specific features (Volkswagen, “driving ideas” 88). India’s buyers’ power is also augmented due to existence of substitute (e.g. motorcycles, rail transport) to which customers can switch when their needs are not met by the automotive industry (Dagmar Recklies 2). To counter against this force the company could embark on brand establishment activities that would increase customer loyalty hence curtail switching (Dagmar Recklies 5).
Finally, what would perhaps influence the automobile company’s future in the Indian market would be rivalry from existing players. Volkswagen is for instance noted to control only a meagre percentage of the Indian market with the biggest market player having been advanced to be Suzuki (Baggonkar 1). What further complicates the situation is that these players have developed cheaper products suited to the industry long before the company entered the Indian market (Baggonkar 1; Enderwick 7). With these having an upper hand in the market than Volkswagen the strategy to partner with some of these is well informed (Patankar 1). The company could however benefit by avoiding price competition – a strategy that has worked with regard to polo brand (Webmaster 1); differentiating its products or buying out the competition (Dagmar Recklies 5).
Overall, according to the five forces analysis, Volkswagen’s strategy in India seems to be working to their advantage. One of the main strengths of the strategy has been the potential partnership with market leaders after acquiring a minority shareholding. Focus on the mass market also has been a good strategic approach since the majority of the Indian consumers exist in this segment. By having not lowered its prices to the level of competitors the company has also been able to focus the attention of its customers to the quality it offers.
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