Final SM Assignment

Table of Contents

Table of contents……………………………………………………………………………………………i

Acknowledgements…………………………………………………………………………………………………………………………………iv

Chapter 1: Introduction...................................................................................................................2

1.0 Automobile Industry..........................................................................................................................2

Chapter 2: Company Profile.........................................................................................................4

2.1 ABC Motors Ltd Background............................................................................................................4

2.2 Mission Statement:............................................................................................................................5

2.2.1 Analysis of Mission Statement:..................................................................................................6

2.3 Vision Statement:..............................................................................................................................6

2.3.1 Analysis of Vision Statement:.....................................................................................................6

Chapter 3: Literature Review.......................................................................................................8

3.1 Industry and Competitive Analysis....................................................................................................8

3.1.1 PORTER’S 5 FORCES..............................................................................................................8

3.2 PESTEL Analysis of ABC Motors Ltd............................................................................................11

3.2.1 Political factors.........................................................................................................................11

3.2.2 Economic factors......................................................................................................................12

3.2.3 Socio-Cultural factors...............................................................................................................12

3.2.4 Technological factors................................................................................................................12

3.2.5 Environmental factors...............................................................................................................13

3.2.6 Legal factors.............................................................................................................................13

3.3 Driving Forces of Automotive Industry...........................................................................................14

3.3.1 Regulatory influences and government policy changes............................................................14

Strategic Management Use at ABC Motors Ltd

3.3.2 Product innovation....................................................................................................................14

3.3.3 Technological change...............................................................................................................15

3.3.4 Marketing innovation................................................................................................................16

3.3.5 The Global and the Domestic market........................................................................................16

3.3.6 Changing societal concerns, attitudes and lifestyle...................................................................16

3.4 Key Success Factors of ABC Motors...............................................................................................17

3.4.1 Highest Market share and brand leader (positive image)..........................................................17

3.4.2 Continuously ensuring a better after sales service.....................................................................17

3.4.3 Strategic Market Segmentation.................................................................................................18

3.5 Internal Analysis..............................................................................................................................19

3.5.1 Indicators of ABC Motors Ltd’s Present Strategy.....................................................................19

3.6 SWOT Analysis of ABC Motors Ltd...............................................................................................23

3.6.1 Factors INTERNAL to ABC Motors Ltd..................................................................................24

3.6.2 Factors EXTERNAL to ABC Motors Ltd.................................................................................26

3.7 Core Competencies and Distinctive Competencies..........................................................................27

3.8 Value Chain Analysis......................................................................................................................28

3.9 Strategy Choice...............................................................................................................................29

3.9.1 ABC Motors Ltd’s Luxury Cars Strategy.................................................................................29

3.9.2 ABC Motors Ltd Cars Appealing to Medium Income Earners Strategy...................................33

Chapter 4: Recommendations and Suggestions................................................................36

4.1 Recommended strategy for ABC Motors Ltd..................................................................................36

4.2 Implementing the Strategy...............................................................................................................38

4.2.1 The Structure of a Strategic Alliance Agreement......................................................................38

4.2.2 Budgeting.................................................................................................................................40

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4.2.3 Human Resources.....................................................................................................................41

4.2.4 Monitoring and Control............................................................................................................41

4.2.5 Linkage - The Foundation for Everything Else.........................................................................41

Chapter 5: Conclusion....................................................................................................................44

References/Bibliography:..............................................................................................................45

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Acknowledgement

This assignment would not have gone smoothly without the help of a dedicated bunch of people.

As a token of appreciation for their efforts and encouragement, we would like to express our

sincere thanks to them for gifting us with their priceless advices.

First of all, our warmest gratitude goes to, Miss O. Bissoon, for her guidance during the entire

phase of this research work.

We would also like to thank the Directing Manager of the ABC Motors Ltd, Mr. Anthony

Tseung and the staffs of the ABC motors Ltd for their help and support and for having found the

required time to respond to our questions.

Last but not the least; we are thankful to every member of the team who has spared no efforts in

working hand in hand till the completion of the assignment.

iv

http://investing.businessweek.com/research/stocks/private/person.asp?personId=59600825

http://investing.businessweek.com/research/stocks/private/person.asp?personId=59600825


Chapter 1: Introduction

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Chapter 1: Introduction

1.0 Automobile Industry

Global automobile industry had a smooth ride and the industry rose in leaps and bounds till the

recession hit the world. Automobile industry was highly impacted by the global financial

downturn and the industry went into a crisis. The period from 2008-2010 is considered to be

period of automotive industry crisis. Most of the big guns in the industry lost huge deals of

profits and sales declined. Many big players reached stage of bankruptcy like General Motors

(GM) and Chrysler. The situation is getting better in 2010 with markets recovering and sales

increasing slowly. In 2008, more than 70 million vehicles were produced but it was less than that

of 2007 due to reduction in demand. The markets in North America and Japan have become

stagnant but there has been rise in demand in developing nations mainly Brazil, Russia, India and

China. China surpassed Japan to become the largest producer of vehicles. Toyota is the largest

automobile company in the world followed by Volkswagen and GM.

Automobile Industry in most parts of the world is highly competitive which has led companies to

go for global expansion and form strategic alliances to be competitive in the market. The

companies are moving towards the fast growing developing nations for their new market and

even using them for exporting vehicles to other parts of the world. Automotive industry is also

incorporating new technologies. The launch of hybrid engine cars in the recent past is one of the

major technological advancement. Many companies are working to produce electric vehicles and

looking for another means of fuel for the cars. The automobile industry is constantly changing.

Due to the recent global recession, there has been a slowdown in the demand of vehicles and

people are moving towards small compact cars which are normally low priced. Many companies

which earlier normally catered to luxury segment are also entering this new attractive segment.

Global expansion has been the foray of automobile industry since long. Companies started

expanding themselves since early 1900’s.

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Chapter 2: Company Profile

3


Chapter 2: Company Profile

2.1 ABC Motors Ltd Background

The ABC Motors Co. Ltd, situated at Military Road, at Port-Louis has been established in 1985

as a subsidiary of the ABC Group. The company markets a wide range of Nissan passenger and

commercial vehicles as well as Nissan Diesel trucks, tractors and buses. It also offers motor

vehicle repair and spare parts distribution services. Since its establishment, ABC Motors Co. Ltd

has ranked among the top sales performers in the vehicles market and has received numerous

awards on its sales performance, service and spare parts facilities, winning the Nissan Gold Prize

Award on several occasions, and the Nissan President Award in 2006, as well as the Nissan

Global Award in 2007. ABC Motors is the No.1 Company, both as a Brand Leader and in terms

of overall market share of motor vehicles sold in Mauritius. In fact, the company has been the

market leader for the past 15 consecutive years. ABC Motors is one such company that has often

gone on its own distinctive way in terms of the design and technology of its cars. This is the

reason why its cars remain above and beyond the ordinary. The company has a strong brand

image based on quality and their commitment to customer satisfaction has been granted

international recognition when they were conferred the Nissan Global Award 2007.

The company has a vision of always being the outstanding automotive company in Mauritius and

its mission is to provide the best service and unique enriching experience in the automotive

industry that delivers superior value to all its stakeholders.

At ABC Motors, they believe that their most precious resource lie in their people, that is, those

who form part of the ABC family. The company believes that it is their passion, drive and

ingenuity that have kept them at the top for all these years. Their employees come from different

backgrounds and cultures and they are proud of this diversity. ABC Motors continuously

improve its human resource policies and are always looking for new and better ways to promote

the professional and personal growth of its staffs. This is why the company is providing

continuous training to its employees. ABC Motors is also committed to drive its quality of

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operations with a customer-driven mindset, to seek sustainable profitable growth, to share the

passion and commitment that drives its future and stretch the boundaries in wider and better

directions.

ABC Motors often organizes car shows to attract its customers and the company has a lot of

concern on the environmental aspects and has been present in Social corporate responsibility

activities since a very long time. ABC motors monitor, and ensure their adherence to law, ethical

standards and international norms.

The company also has a Service Department which is a one-stop shop that provides a complete

maintenance solution regarding Nissan, Alfa Romeo and Porsche vehicles. Its services range

from routine servicing to high precision repairs such as gearbox and engine overhauling and

advanced diagnosis, using the latest technology and diagnosis equipment. ABC Motors also

possess a team of experienced technicians who are groomed to the highest standards, and they

undergo continuous training delivered by a Nissan-certified instructor, which ensure quality

workmanship in every vehicle maintained. The company also offers value-added services such as

Nissan Express Service, loyalty program, shuttle service and 24/7/365 roadside assistance/towing

service. Besides, ABC Motors is one such company that uses Nissan Genuine Parts and

Accessories unlike other companies who sell imitation parts that later affect the vehicle's

warranty or resale value, and cause excess wear-and-use expenses.

2.2 Mission Statement:

Providing the best service and unique enriching experience in the automotive industry that

delivers superior value to our stakeholders.

ABC Automobile is committed in:

Providing continuous training to its employees

Driving its quality of operations with customers-driven mindset

Seeking sustainable profitable growth

Sharing the passion and commitment that drives our future5


Stretching the boundaries in wider, better directions

2.2.1 Analysis of Mission Statement:

ABC Motors Ltd demonstrates the types of products that it sells by saying that it is in the

automotive industry. The mission statement shows that it strives to differentiate its products by

wanting to provide a superior value to its stakeholders (customers, suppliers, shareholders,

employees and people in the community). It might act as a motivation for the employees of

ABC Motors Ltd since it provides continuous training to make them prosper and have improved

skills. It further shows that it wants to achieve better quality through its customers by proposing

them better offerings and plans in vehicles. It also demonstrates the aspect of wanting to

increase and maintain profitability. The company seeks to develop new technologies so as to be

able to provide unique and enriching experience.

2.3 Vision Statement:

Always be the outstanding automotive company in Mauritius.

2.3.1 Analysis of Vision Statement:

The vision shows that ABC Motors Ltd wants to outcompete its rivals by always providing the

best of its vehicles and spare parts. It projects to always stay the brand Leader among others of

its kind. The market that it is pursuing is undifferentiated since its cars are designed for

everyone depending on the customer’s choice. However, despite the time frame (always) has

been stated in the vision statement, it is vague and not so specific. It does not indicate the

business position that ABC Motors Ltd intends to stake out. There is no clarification in the

direction (strategic path) in which the company wants to move. Moreover, it does not appeal to

the long term interest of its stakeholders.

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Chapter 3: Literature Review

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Chapter 3: Literature Review

3.1 Industry and Competitive Analysis

3.1.1 PORTER’S 5 FORCES

Even though competitive pressures in various industries are never precisely the same, the

competitive process works similarly enough to use a common analytical framework in gauging

the nature and intensity of competitive forces. As Professor Michael Porter of the Harvard

Business School has convincingly demonstrated, the state of competition in the automobile

industry is a composite of the five competitive forces as follows:

3.1.1.1 The threat of new entrants

In the automobile industry, this is generally a very low threat. It is not that easy for a new entrant

to enter into a car industry because of the brand loyalty of customers. As such, for newly set up

motor dealer manufacturers, it will be difficult since ABC Motors Ltd is already the preferred

brand and customers are loyal to them. Factors to examine for this threat include all barriers to

entry such as upfront capital requirements (it costs a lot to set up a car manufacturing facility),

brand equity (a new firm might not have it), legislation and government policy, ability to

distribute the product. Moreover, tariffs imposed by the Mauritian government might make new

motor dealer reluctant to enter this particular industry. There have been no major entrants in the

Mauritian market. However, Leal Company has acquired Sam Motors which was the official

seller of Kia trademark.

The threat of new entrants is very low in the automobile industry. The industry is very mature

and it has successfully reached economies of scale. In order to compete in this industry a

manufacture must be able to achieve economies of scale. Access to distribution channels is

another high barrier to entry.

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3.1.1.2 The intensity of the competitive rivalry

Competition between existing automobile companies is high because there are too many choices

for the customers. The Mauritian market is very competitive with players such as Beechand

Company (Toyota), E.A.L Man Hin Company (Honda), International Motors Company

(Hyundai and Isuzu), Leal Company (BMW, GWM and Mini Cooper), Iframac Company

(Mercedes and Mitsubishi) and so on. Following the availability of different brands, customers

have low costs in switching to rival brands. That may cause the industry earning lower profits

when the cost of the competition is high. In order to attract more customers and to maintain the

position of brand leader, ABC Motors Ltd implements active efforts to improve quality, to offer

better performance features and better customer service. There is active product innovation and

also lots of advertising and sales promotions. There is also price competition in the industry.

Increasing consumer warranties or service is very common these days. To maintain low cost, the

company consistently has to make manufacturing improvements to keep the business

competitive.

Rivalry among the competitors is very strong is the automobile industry. The major competitors

are so closely balanced that it increases the rivalry. In order to gain market share in the

automobile industry ABC Motors Ltd must gain market share by taking it from its competitors

listed above. The competitors are compared to one another constantly. The price, quality,

durability, and many other aspects of different manufacturers are greatly taken into consideration

when deciding what type of vehicle to purchase.

3.1.1.3 The bargaining power of buyers

Buyers have a higher bargaining power especially when there are many sellers in the country and

the latter is price sensitive and well-educated regarding the product. Although ABC Motors Ltd

is one of the most famous automotive industry in Mauritius, there are also several suppliers of

vehicles such as Beechand Company (Toyota), E.A.L Man Hin Company (Honda), International

Motors Company (Hyundai and Isuzu), Leal Company (BMW, GWM, Mini Cooper and

Renault), Iframac Company (Mercedes and Mitsubishi,) and so on that also focuses on the

consumers trends and tastes to attract its buyers. This means that since ABC Motors Ltd has

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many other competitors, buyers have a higher bargaining power. Moreover, the increased

presence of the Web has eased the process of information gathering and has thus helped in

making it easier for buyers to switch from one supplier of vehicles to another to obtain the best

price and therefore the internet has greatly increased buyer’s bargaining power. Also the

government policies on safety, environment, licensing and high and fluctuating oil prices put

pressure on buyers and force them to have more negotiations with the sellers. Since the

bargaining power of buyers is high, this represent a major threat for ABC Motors Ltd as its

consumer sales is its largest source of revenue. Thus, taking consumer confidence into account is

the highest priority for ABC Motors Ltd.

3.1.1.4 Threat of substitute products

If buyers can look to the competition or other comparable products, and switch easily (they

have low switching costs) there may be a high threat of this force. With new cars, the

switching cost is high because a brand new car cannot be sold for the same price it is paid for.

A Porter’s 5 Forces analysis of the car industry covers the new market, not used or second-

hand.

Product differentiation is important too. In the car industry, typically there are many cars that

are similar - just look at any mid-range Nissan and you can easily find a very similar Toyota,

Honda, or Mazda. Given the wide range of substitutes available from other companies, the

threat of substitutes products seem to be quite high.

High costs of living are making buyers to go for economic cars which involve less petrol

consumption. Examples of such cars are Kia (provided by Leal), Suzuki (provided by Axess).

Therefore switching costs are low.

The bargaining power of suppliers is very low in the automobile industry. There are so many

parts that are used to produce an automobile, that it takes many suppliers to accomplish this.

When there are many suppliers in an industry, they do not have much power. There are so many

suppliers to this industry; manufactures can easily switch to another supplier if it is necessary.

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3.1.1.5 The Bargaining Power of Suppliers and Supplier-Seller collaboration

It is costly for ABC Motors Ltd to switch suppliers because of the fact that the company is

the only authorized dealer of some make of vehicles range which includes Porche, Alfa-

Romeo and Fiat.

In the car industry this refers to all the suppliers of parts, tires, components, electronics, and

even the assembly line workers. If there are few suppliers providing material essential to

make a product then they can set the price high to capture more profit. Powerful suppliers

can squeeze industry profitability to great extend.

3.2 PESTEL Analysis of ABC Motors Ltd

PESTEL Analysis is a simple, useful and widely-used tool that helps to understand the "big

picture" of the Political, Economic, Socio-Cultural, Technological, Environmental and Legal

aspects. As such, it is used by business leaders worldwide to build their vision of the future.

PESTEL analysis is concerned with the environmental influences on a business. Identifying

PESTEL influences is a useful way of summarizing the external environment in which a business

operates. (Kaur, 2009)

Therefore, a PESTEL Analysis is carried out for ABC Motors Ltd which will help in

understanding its market growth, business position, potential and direction for operations.

3.2.1 Political factors

These refer to government policy such as the degree of intervention in the economy. These

factors have affected the car industry since long. Almost all of the regulations come from

consumers increasing concerns for the environment and the concern for safer automobiles. Major

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political factor that can affect ABC Motors Ltd sales is the global petrol prices. The current

increase in petrol prices is having a major impact on major economies. For instance, with the rise

in petrol prices, consumers are demanding higher fuel efficient and small cars and lesser of the

big and luxury cars. Another factor might be the taxation policy of the country which implies

paying tax rates when buying cars.

3.2.2 Economic factors

These include interest rates, taxation charges, economic growth, inflation and exchange rates.

The major factor that affects the automobile industry is the exchange rate. For instance, in the

year 2009, the sale of new cars was largely affected due to an appreciation in Japanese Yen and

Euro. Sales figure were down by around 25%. This is because a strong currency makes exporting

more difficult as it raises the price in terms of foreign currency. As a result, customers in

Mauritius shifted from the Japanese cars towards the Chinese and Korean cars which cost 30%

lesser than the Japanese cars. This encouraged ABC Motors Ltd to import Chinese pick-ups.

Furthermore, importation of new cars was also affected due to the financial crisis.

3.2.3 Socio-Cultural factors

Changes in social trends can impact on the demand for a firm's products and the availability and

willingness of individuals to work. Due to the change of lifestyle of people, this leads to

increased purchase of automobiles, so automobile sector have a large customer base to serve in

Mauritius. Mauritian customers are highly discerning, educated and well informed. They are

price sensitive and put a lot of emphasis on value for money. There is a preference for small and

compact cars, which ABC Motors Ltd sells and are even socially accepted even amongst the well

off. In addition, fuel efficient cars are more and more demanded among the Mauritian

consumers.

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3.2.4 Technological factors

The technological factor includes new technologies that are used to create new products and new

processes. Technical developments have made the modern car safer, lighter, more fuel-efficient,

and faster. Customized solutions (designer cars, etc) can be provided with the proliferation of

technology. As a result, technology can reduce costs, improve quality and lead to innovation.

These developments can benefit consumers as well as the organization. With an array of

advanced technologies for assured performance and safety, ABC Motors Ltd gives its customers

the required satisfaction and confidence. Also, the internet has affected just about every industry

in the world and has also had a huge impact on the automobile industry. ABC Motors Ltd has an

online assistance service, which will help its customers to get any information or services

anytime. Its latest offerings and news are posted in its website as well. Therefore, internet makes

it easy to collect and analyze customer feedback.

3.2.5 Environmental factors

Environmental factors include the weather, climate change and the environment itself. With

major climate changes occurring due to global warming and with greater environmental

awareness this external factor is becoming a significant issue for firms to consider. The growing

desire to protect the environment is having an impact on many industries such as the travel and

transportation industries. Companies are moving towards environmentally friendly products

(Oxford University Press, 2007). For instance, ABC Motors Ltd is awaiting the introduction of

the electric car (Nissan Leaf) by the end of this year. Furthermore, ABC Motors Ltd is

introducing cars with latest technology which have reduced emission rates.

3.2.6 Legal factors

The legal factors are related to the legal environment in which firms operate. Firms are affected

by the laws and regulations which are introduced by the government. For instance, ABC Motors

Ltd is largely affected by heavy excise duty and high import duty of cars. These duties make the

price of cars higher and are ultimately passed on to the final customers. In addition, the

13


government will be introducing laws to regulate the emission rates of cars so as to avoid

pollution. These measures are likely to affect ABC Motors Ltd in which case it will have to

import cars with lesser emission rates or even introduce new technology to combat high emission

rates.

3.3 Driving Forces of Automotive Industry

Many events can affect the automotive industry powerfully enough to qualify as driving forces.

Below are the industry real drivers of change:

3.3.1 Regulatory influences and government policy changes

Government regulatory policies are affecting not only the operations of ABC Motors Ltd but all

other automotive companies in the industry. A new law to regulate C02 emissions has been

introduced. The ceilings on CO2 emissions will, by December 2012, be 158 grams per

kilometer.

CO2 Levy will be taxable if the emission of carbon dioxide per km exceeds the threshold of 158

grams per kilometer. And the proposed rate is Rs 2000 gram /km for cars whose emission varies

from 159 to 190 grams of CO2 per kilometer, Rs 3000 per gram / km for emissions from 191 to

225 grams of CO2 / km, Rs 4000 per gram / km for emissions from 226 to 290 grams of CO2 /

km and Rs 5000 gram / km for emissions exceeding 290 grams of CO2 per kilometer.

The amount paid will be the product of the difference between the number of grams of CO2 per

km of a car and the ceiling of 158 grams CO2 per kilometer, multiplied by the rate of CO2. For

example, for a car that emits 168 grams / km, an amount of Rs 20,000 need to be paid.

Such legislation will make people to demand vehicles having less C02 emissions. Companies

that will be the first to provide such vehicles are the one that would be earning the greatest

profitability until the majority companies follow the same steps.

(http://motors.mega.mu/news/2011/07/14/assemblee-nationale-maurice-ile-durable-new-law-

regulate-co2-emissions/)

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http://motors.mega.mu/news/2011/07/14/assemblee-nationale-maurice-ile-durable-new-law-regulate-co2-emissions/

http://motors.mega.mu/news/2011/07/14/assemblee-nationale-maurice-ile-durable-new-law-regulate-co2-emissions/


3.3.2 Product innovation

Product innovation can shake up the structure of competition in the automotive industry by

broadening the industry customer base, rejuvenating customer growth and widening the degree

of product differentiation among rival sellers like Leal & Co, E.A.L Man Hin & Sons and Sam

Motors. For example, the all-electric Nissan Leaf will be available by ABC Motors by the end

of year 2011. The five-seat, five-door hatchback was lauded for overall driving performance,

quietness and handling. Nissan claims that the LEAF can travel more than 100 miles on a full

charge; it takes approximately eight hours to full recharge on a 220 to 240 volt power supply.

Innovative in the automotive industry may be in the form of the product itself (like the Nissan

LEAF) or in its features or attributes. In the majority of markets, the average new-car buyer is

40 years old. By 2015, that age is expected to increase by four years. Developing cars for this

target group does not mean building “old-age cars.” It means equipping cars with design and

handling features that the target group will find useful, exciting and desirable without sacrificing

the model’s overall statement. A car designed for an older target group might feature:

Ergonomically designed boarding, loading and seating solutions

Visual aids for better night and rain vision

Easy-to-use functions even for complicated devices

Timeless design features

Speed and special attention recommendation displays

Side and rear-view cameras

Customized mobility services

Mauritius is characterized as having an ageing population. Companies can satisfy this niche

market with special attributes (as pointed out above), that will make old person’s lives more

comfortable. Demand from this specific market will increase that will eventually increase

profitability.

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3.3.3 Technological change

The pace of technological developments in electronic commerce via the internet is fast changing

the way business is conducted in the automotive industry. For instance, the internet increases the

number of people working from home and thus reduces automotive use for commuting. Also,

the internet, most particularly the website of ABC Motors Ltd enables customers to view all the

types of vehicles available in the showroom of ABC Motors Ltd. The increase in technological

change will eventually lead to an increase in demand for cars via internet and queries on their

prices, hence automotive industry profits will tend to decrease since customers will have more

bargaining power and more information on the lowest priced cars.

3.3.4 Marketing innovation

When firms are successful in introducing new ways to market their products, they can spark a

burst of buyer interest and widen the industry demand. Since the internet is becoming the

vehicle for all kind of marketing innovation, ABC Motors Ltd market all its cars (Nissan,

Porsche, Alfa Romeo, Fiat, Yutong and trucks) via its website. ABC Motors Ltd has an online

assistance service for all the queries of customers concerning quotation and servicing request.

Also, videos and specific details on each type of vehicles that ABC Motors Ltd sell are found on

its websites which, in other words serve as a marketing strategy. The greater car dealers have

marketing innovation in the automotive industry, the greater the demand for cars, hence

increasing the profitability of automotive industry.

3.3.5 The Global and the Domestic market

Actually the world economy is experiencing an unfavorable economic condition (recession) that

will consequently affect all domestic countries’ economy. Such a condition implies that a basket

of goods costs more compared prior to the bad conditions. As a result demand for less fuel

consumption cars will experience an increase because cars are no longer perceived as a luxury

good but rather than a necessity. So consumers would be willing to buy an economic car. Again

the first mover in this situation will earn greater profits.

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3.3.6 Changing societal concerns, attitudes and lifestyle

Emerging social issues and changing attitudes and lifestyles can instigate automotive industry

change. For instance, the all-electric Nissan Leaf reduces air and noise pollution as it is quieter

and it emits zero emissions. Also, it is made from recycled materials and can be recycled and it

costs less to run, own and maintain. ABC Motors Ltd maintains after sales service on its

vehicle’s parts and accessories where it maintain the resale value, safety and quality of the

vehicle and insists on new vehicle genuine parts. The greater customers are being conscious of

global warming and safety issues, the greater demand will be for the industry and the less the

profitability for the industry. The automotive industry’s competition is fierce and the one with

the most innovative cars will succeed. For example, in Mauritius the competitors dealing in

vehicles are great in numbers (Sam Motors, Leal & Co Ltd, E.A.L Man Hin & Sons).

3.4 Key Success Factors of ABC MotorsKey success factors are factors that are necessary for an organization to achieve its mission. It is

a critical factor or activity required for ensuring the success of a company or an organization.

The following are thought of to be the key success factors of ABC Motors Ltd where it is most

competent and financially successful.

3.4.1 Highest Market share and brand leader (positive image)

Since customers entrust their safety and a portion of the sizable of their income to ABC Motors

Ltd, hence their figures greatly matters in customers’ buying decisions. For example, ABC

Motors Ltd has been the market leader for 15 consecutive years, has received Nissan Gold Price

Award on several occasion, Nissan President Award in 2006 as well as Nissan Global Award in

2007. Moreover, it is the brand leader and in terms of overall market share of motor vehicles in

Mauritius during the year.

17

http://en.wikipedia.org/wiki/Mission_statement


3.4.2 Continuously ensuring a better after sales service

QuikFix Service Centre, the specialist in maintenance of reconditioned and second hand vehicles

brings a new dimension in the automotive division by proposing a one stop shop for all makes

and models of vehicles. ABC Motors Ltd’s dedicated service advisors acts as intermediate

between their highly experienced team of technicians and clients in order to guide them through

each step and help them to make the best repairs options for their vehicles.

3.4.2.1 QuikFix Service Centre Features:

Fully Computerized Service and Tyre Centre.

The Specialist in automotive service and repairs, as well as wheel Alignment and

Balancing.

Features one of the latest technologies in Mauritius.

Equipped with a Rav120 and Cemb C34 for light vehicles wheel balancing.

RavG118 available for wheel balancing of trucks.

Wheel balancing for cars, pick-ups and heavy duty trucks equipped with stenhoj (heavy

duty lifts).

Major 430A 4-posts autolift and one of the world’s most sophisticated wheel alignment

tools DSP 400 and DSP 600 fitted with digital cameras used for Digital Signal

Processing.

Equipped with a 20-bar air compressor, air-gun, and pneumatic tyre changer Cemb

SM910.

Jacks for vehicles of up to 10 tons available and also equipped with two tyre changers.

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3.4.3 Strategic Market Segmentation

The product range of ABC Motors Ltd includes cars, trucks and buses that are targeted for both

commercial and personal uses. Among these product ranges, the product lines of cars include

luxury cars, sports cars and economy cars. It can be noted that the company has left no stone

unturned because it has clustered its products for different purposes according to the financial

and preferences of customers. For instance, sports drivers can look out for a Porsche car, high

income earners can consider buying an Alpha Romeo or Nissan X-Trail while middle income

earner can afford a Nissan March. The management has opted this strategy because nowadays

every working people is a potential car buyer (because of facilities such as car loans and so on)

and by clustering its market ABC Motors Ltd is surely earning more profits that it would have

been if it considered targeting a specific.

3.5 Internal Analysis

3.5.1 Indicators of ABC Motors Ltd’s Present Strategy

3.5.1.1 Vehicles Sold by ABC Motors Ltd in 2010

According to ABC Motors Ltd report 1745 vehicles were sold in 2010, including 1205 new

units.

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Nissan remains a top seller with 1,093 vehicles sold. The brand of ABC Motors Ltd was up

19.2% in volume compared to 2009.

Despite the difficult period after the financial crisis and a weakening global auto market, ABC

performed an achievement. The Executive Director said that this is the result of a long process

led by strong sales and traditional values. Furthermore, 540 new vehicles were also sold by

Ginza Motors, a subsidiary of ABC Group.

This can be clearly seen from the amount of Nissan March that is actually on the Mauritian

roads, and another vehicle which has seduced the Mauritians is the Nissan Qashqai.

3.5.1.2 Nissan recognizes ABC Motors Ltd

For grabbing the number one position in terms of market share for the last 15 consecutive years,

ABC Motors Ltd was conferred a unique recognition by the Nissan Motor Co Ltd. In this

context, the company organized an award ceremony on April 8, 2011 at Domaine Anna, Flic en

Flac. ABC Motors Ltd has driven Nissan’s share to the top spot for 15 years in a row since 1996.

Furthermore, the Nissan brand hold a special place among Mauritians with the motto ‘ene Nissan

reste ene Nissan’. The company has been able to cater for the needs of the changing market and

introduced new models that answer the demand of the market.

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3.5.1.3 New products and showroom

ABC Motors Ltd is currently awaiting the introduction of the car with the latest technology, that

is, the Nissan Leaf. Mauritius will be the first country in the African region, Middle East and

India to introduce the Nissan Leaf. The production of this car has already started, and the

company expects to receive this car by the end of this year. This car is very environment friendly

with a CO2 emission of zero.

Besides, to better serve the customers, a new service centre will be constructed at Phoenix. This

will help customers from the south and also those of Plaine Wilhems, as they will no longer need

to travel to Port Louis and suffer in the traffic.

In addition, ABC Motors Ltd has opened a showroom dedicated to German automaker Porsche.

ABC Motors Ltd is the sole dealer of the giant German automaker. The high-end automobile

market in Mauritius is actually expanding with a growth rate of 30 per cent between 2010 and

2011.

The entire Porsche product range will be sold in Mauritius, with the sports utility vehicle

Cayenne expected to have the largest market share amongst Porsche vehicles. An exclusive

Porsche site is expected to be set up in Phoenix by September 2012.

Furthermore, ABC Motors Ltd has also introduced vehicles which are made in China. 21


3.5.1.4 In search of new markets

Despite being a top seller in Mauritius, the management of ABC Motors Ltd believes that the

sales in Mauritius are limited. Sales perspectives in Mauritius are rather limited, from 1745

vehicles in 2010 to 3000 in 2015. To better achieve the company objectives, the company has

decided to acquire new markets. They affirm that the African markets represent a rising market.

ABC Motors Ltd intends to set up in countries such as Kenya, Madagascar and Mozambique.

The company also aims to serve the rural areas of South Africa with buses and also seeks

markets where the demand for trucks is high.

3.5.1.5 Global Nissan Award

In 2008, ABC Motors Ltd was awarded with the Global Nissan Award for the third time. This

award was not only for the sales, but also for the after sales services. It can be said that the

company has a good image and reputation with its customers where it has a better customer

service, product innovation and product quality compared to its rivals.

3.5.1.6 Different Models

The comfort factor came to boost the reputation of Nissan. It was the first company to include

air conditioning as an integral part, and not as an option. Electric windows were introduced short

after this. The Nissan models increased in less than no time. From 3 models of cars and 2

models of pick-ups, the company now has 32 different models to offer. This helps ABC Motors

Ltd to gain access to a larger market share in terms of age groups (young and elderly) as well as

the social class (average class and the rich), who look for power, comfort and/or luxury.

Indirectly, the form aims to serve on a broad spectrum and does not concentrate on a niche, such

as BMW cars or even Mercedes car, which are rather meant for the richer people.

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3.6 SWOT Analysis of ABC Motors Ltd

(Source: www.hrmadvice.com)

A scan of the internal and external environment is an important planning process. Environmental

factors internal to the firm are classified as the strengths and weaknesses, and those external to

the firm is classified as opportunities and threats. Such an analysis of the strategic environment

is referred to as a SWOT Analysis (QucikMBA, 2010). This is illustrated in the diagram above.

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For the purpose of this assignment on ABC Motors Ltd, a SWOT analysis is carried out in order

to know where the business is in the marketplace and what strategies can be developed to

increase its market share. In other words, this analysis will provide information that is helpful in

matching ABC Motors Ltd resources and capabilities to the competitive environment in which it

operates.

3.6.1 Factors INTERNAL to ABC Motors Ltd

3.6.1.1 Strengths

The strengths describe the resources and the skills a company has acquired. The strengths of

ABC Motors Ltd are as follows:

Since the establishment of ABC Motors Ltd in 1985, the Company has ranked among the

top sales performers in the vehicles market and has received numerous awards on its

Sales Performance, after sales, service and Spare Parts facilities, winning the Nissan Gold

Prize Award on several occasions, the Nissan Global Award 2005 and 2007.

ABC Motors Ltd is the No. 1 company, both as a Brand Leader and in terms of overall

market share of motor vehicles sold in Mauritius. ABC Motors Ltd has been the market

leader for the past 15 consecutive years. Brand strength provides competitive advantage

that can offset the increasing competition.

The company has a ‘Quikfix Car Centre’ which brings a new dimension in automotive

service as it houses under one roof, a tyre centre equipped with the latest wheel balancing

and alignment facilities and also provides a complete solution regarding the maintenance

of all brands and models of vehicles. The service philosophy of the Car Centre is to

deliver consistent and superior standards of service at competitive pricing.

There is a harmonious and mutually rewarding relationship with all its stakeholders and

therefore building a long term partnership.

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ABC Motors Ltd has an online assistance service, which will help its customers to get

any information or services anytime. Its latest offerings and news are posted in its

website as well.

Manufacturing Process: One of the key strengths is in its manufacturing process and

technology. The company have concentrated efforts on fostering a culture of continual

improvement in many similar ways to Total Quality management.

ABC Motors Ltd has a lot of concern on the environmental aspects and the company has

been present in Social corporate responsibility activities since a very long time. ABC

Motors Ltd monitors, and ensure their adherence to law, ethical standards and

international norms. ABC also offers a complete maintenance solution regarding Nissan,

Alfa Romeo and Porsche vehicles.

Moreover, their services range from routine servicing to high precision repairs such as

gearbox and engine overhauling and advanced diagnosis, using the latest technology and

diagnosis equipment. ABC Motors Ltd also provides Nissan Genuine parts and

accessories to its customers, unlike other companies who sell imitation parts that later

cause damage to the vehicles.

3.6.1.2 Weaknesses

Weaknesses are the qualities that prevent a company from accomplishing its mission and

achieving its full potential. These weaknesses deteriorate influences on the organizational

success and growth. Weaknesses of ABC Motors Ltd are listed below:

The company markets a wide range of Nissan vehicles. The product recalls in 2004 has impacted

on the sales of Nissan vehicles of ABC Motors Ltd. It isn't so much of a problem today, but in

2004, Nissan recalled more than 2.5 million cars worldwide. This was due to an engine defect.

Significant harm has been done by this event to Nissan brand image. Fortunately no reports of

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accidents were caused by the defect in the engines; it looked as a result of this incident Nissan's

image was severely affected.

3.6.2 Factors EXTERNAL to ABC Motors Ltd

3.6.2.1 Opportunities

Opportunities are presented by the environment within which our organization operates. These

arise when an organization can take benefit of conditions in its environment to plan and execute

strategies that enable it to become more profitable.

ABC Ltd is the market leader since 15 years and thanks to this, it has already attracted several

customers to its firm. But the company is still finding new opportunities in order to maintain its

existing customers and attract new ones and thus ABC Motors Ltd is organizing a car show

which will take place in a few months at Phoenix les Halles and a car expo which will take place

at Le Caudan Waterfront. The car show and car expo will represent an opportunity for ABC

Motors Ltd to gain more customers and build long term relationship with them.

3.6.2.2 Threats

Threats arise when conditions in external environment jeopardize the reliability and profitability

of the organization’s business. Threat faced by ABC Motors Ltd are as follows:

Commodity Prices: ABC Motors Ltd could incur higher costs because China is now

expanding. Over the past two years the price of steel in Production has risen substantially.

There is also the increase in oil prices to consider which continues unabated. Demand for

new vehicles is now reducing. This threatens the company’s viability in the area.

Competitive Rivalry: ABC Motors Ltd is not the only seller of cars in Mauritius and

there is a currently a high level of competition as rivals attempt to increase their market

share. In fact, today there are so many car companies that it becomes difficult for one to

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choose the best supplier among all of them. Thus, ABC Motors Ltd is faced with several

kinds of competitors in the local market and this represents a major threat for the

company. Besides, when there are lots of sellers in the local market, this also increases

the bargaining power of the buyers. So, ABC Motors Ltd has to always adopt new

strategies and try to innovate to remain the best to losing its customers.

The competitors of ABC Motors Ltd are Leal & Co. Ltd, Iframac and E.A.L Man Hin & Sons.

3.7 Core Competencies and Distinctive CompetenciesA core competency is an internal activity that a company performs better than other internal

activities. It is a well-performed internal activity that is central, not peripheral, to a company`s

profitability, strategy and competitiveness.

The core competencies of ABC Motors Ltd are listed as follows:

ABC Motors Ltd has often gone in its own distinctive way in terms of the design and

technology and this has allowed the company to have a competitive advantage in the

local industry

The company provides continuous training to its customers so that they can always

deliver a good service.

A distinctive competence is a competitively valuable activity that a company performs better

than its rivals. The distinctive competencies of ABC Motors Ltd are as follows:

The company has developed a strong brand image based on quality and their commitment

to customer satisfaction has been granted international recognition.

ABC Motors monitor, and ensure their adherence to law, ethical standards and

international norms unlike other car companies.

ABC also provides Nissan Genuine parts and accessories to its customers, unlike other

companies who sell imitation parts.

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ABC Ltd has a timely supply system that has been established so that parts required,

including those older models, are available to dealers at all times and this is not possible

with other car sellers.

ABC provides reliable products at competitive prices.

3.8 Value Chain Analysis Together with its business partners, ABC Motors Ltd aims to achieve sustainable, profitable

growth on a foundation of mutual trust. Rather than insisting solely on own demands, it always

strive to listen carefully to the ideas and suggestions of its suppliers and dealers from an equal

footing. The firm places a special focus on working together with the suppliers as partners,

developing cooperative relations that enable the latter to bring in best practices in order to stay

ahead in the fierce competition of the auto industry in Mauritius.

Nissan's value chain today extends around the globe due to the expansion of the company's

business interests. ABC Motors Ltd strives to improve its CSR management by sharing its

fundamental values and principles with its business partners, thereby promoting consistency in

the CSR activities undertaken throughout the supply chain.

The company considers its suppliers as important business partners. It works with them to build

relationships based on the three values namely:

trust (work fairly, impartially and professionally),

respect (honor commitments, liabilities and responsibilities), and

transparency (be open, frank and clear).

It also undertakes various measures to ensure that its approach to compliance is shared with

dealerships and to enhance its internal controls. ABC Motors Ltd aims to further improve its

CSR management by strengthening the lines of communication with dealers.

Moreover, ABC Motors Ltd apply the concept of value chain analysis in its business since it

outsource certain activities to other manufacturers while doing those activities that it is best in

doing. ABC Motors Ltd imports the cars from other countries but provide additional facilities

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that it is best in doing such as putting fog lights in vehicles, changing the seats to leather ones

and so on.

3.9 Strategy ChoiceABC Motors Ltd markets specific makes and models of vehicles that are targeted at particular

socio-economic classes and thus social status came to be associated with a particular vehicle than

ownership of a car per se. The luxury models of cars that ABC Motors Ltd markets for its lines

are Murano, Teana, Porsche, Nissan 350Z, Nissan 370Z and Skyline. These types of cars are

mostly for high income earners who want to differentiate themselves from medium income

earners. The models of cars that basically appeal to average people are Nissan Sunny, Nissan

March, Bluebird and Tiida.

3.9.1 ABC Motors Ltd’s Luxury Cars Strategy

Nissan 370Z (Sports car)

The new Nissan 370Z proudly boasts these adrenalin-inducing elements that have made the Z’s

some of the most sought-after cars to ever take to the road. Striking trend-setting improvements

in performance and quality, coupled with ultramodern styling make the new Nissan 370Z the

ultimate showpiece to satisfy both Nissan’s passion to design the finest sports car and customer’s

passion to drive one.

Nissan 370Z groundbreaking technology monitors the 6-speed manual’s clutch pedal operation,

shift lever movement and vehicle speed. As customers shift to a lower gear, the system will

“blip” the throttle to the ideal engine speed for a supremely smooth downshift as they let out the

clutch. The system also works when upshifting to give customers a smooth flow of power when

accelerating. If customers want to marvel at modern technology and feel the difference for them,

they can turn the system off with a switch mounted next to the shift lever.

Fine stitching and quality materials combine to create one of the best-looking sports car interiors,

but Nissan’s innovative interior design also groups items by how customers use them, so

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customers feel completely connected the instant they settle in behind the wheel. No detail is left

unnoticed, from the iconic driver-angled triple gauges above the centre console to a special

kidney-shaped steering wheel rim designed from exhaustive studies of how a driver’s hands grip

the wheel.

Some of the key interior design features include:

• Windshield pillar minimized to improve outward vision in corners

• Oval steering wheel opening for enhanced viewing of large gauges

• Gauges adjust with steering column, so view is optimized

• Illuminated push button ignition

• Centre console controls are grouped for easy operation

• Steering column mounted paddle shifters on 7-speed automatic

• Uniquely bolstered driver’s seat for enhanced support

• Integrated knee pads on both sides of centre console

• Anti-slip material on seat cushions

The cockpit of the 370Z comfortably encompasses the driver, with the low driver’s seat hip point

keeping the body from shifting laterally and providing support to hold out against powerful

cornering forces. The pedals and steering wheel allow for quicker driving action, and the front

pillars allow for clear driver visibility, even on treacherous curves, so that customers would not

miss anything on this thrill-a-second ride. Seats are covered with high quality leather, and leather

embellished with double stitching also covers the centre stack storage bin. Finishing touches in

the 370Z include a passenger side-glove compartment, an accessory case and premium sound

system with Bose speakers.

The black leather interior and meticulous workmanship inside every 370Z creates a sophisticated

and suave ambience that carries through the car’s overall muscular modern look.

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Nissan 370Z is a luxurious sports car designed for young and people who love speed. According

to Porter’s five generic strategies, for this type of car, a focused differentiation strategy will

mostly be used by ABC Motors. A focused strategy based on differentiation depends on there

being a buyer segment that wants or needs special products attributes or company capabilities.

The target segment is already here which is composed of young people who demand cars with

speed and unique. Nissan 370Z users will look for the above special features and attributes

because these unique features differentiate a Nissan 370Z with another car, for instance, Nissan

March.

Murano

Murano is a resounding answer to the question, “How does one stand out in the big city?” No

doubt, Murano makes a statement. Sculpted like a work of art. Murano offer just a hint of the

euphoric experience waiting behind the wheel. Prepare to be stimulated inside the luxurious

interior. Part sedan, part sports saloon, Murano is a crossover.

Ease into a space that is more a parlor than a cockpit. It is a more premium saloon than SUV.

Inside Murano, every detail from the leather trim and upholstery to the chrome accents is

designed to arouse the senses and relax the soul. It is a place for stopping time, even while

moving forward.

In mud, rain or snow, Murano’s ALL-MODE 4x4-i system offers maximum traction and instant

response, with up to 50% torque transfer to the rear wheels. ALL-MODE 4x4-i is a fully

integrated system that analyzes the terrain as customers drive, distributing precisely the right

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amount of torque to the front and rear wheels. Whatever the weather or surface, customers have

the confidence of knowing the 4-wheel drive will engage automatically when conditions demand

it.

Murano has a firm suspension, instantaneous steering response and unbeatable stability for an

altogether smooth ride. All wheels incorporate shock absorbers with built-in rebound springs, a

feature that eliminates extraneous lateral motion and up-and-down pitching when traversing

uneven surfaces. Rolling has also been minimized, so Murano hugs the road when cornering.

Handling and response are so fine that you will always feel in command.

Performance customers can trust, even at high driving speeds. Murano’s newly developed

platform has been designed to deliver a quiet, stress-free ride, offering the comfort and the sporty

driving performance that customers expect from a luxury sedan. In the front end, the side panels

have been straightened; the upper and lower structures have been joined to bolster the rigidity of

the top left and right suspension components. In the rear, a cross member has been added to join

the left and right shock absorber mounts.

Murano, a luxury car is designed for elite class of society; hence ABC Motors will most

probably be using a differentiation strategy as all categories of people can buy one provided they

have financial capabilities. The stronger customers think the car, Murano appeal to their specific

preferences and that the differentiated offerings are worth for their lifestyles, the more customers

will bond with ABC Motors.

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Rich person normally buy car which reflects their personality trait and this can be used to

promote the different brand make. Through personal selling and appropriate targeting, the

expected outcome can be achieved. For example, targeting clients at Domaine Anna or big hotels

such as Labourdonnais Hotel group. Since these people are the one who both earn and spent a

lot, they will be enticed by the different or unique features available only to a specific make of

car. There is not a single billionaire who would not want to show off with his car unique features

specially those who are addicted to the sporting and drifting and tuning fashion.

3.9.2 ABC Motors Ltd Cars Appealing to Medium Income Earners Strategy

Nissan Micra/March

Nissan March mission is to make driving fun. Zipping through crowded city streets or changing

lanes on the highway, the March’s spirited, fuel-efficient engine and smooth suspension give

customers exceptional control. The experience of driving the March can only be described as

exhilarating.

March offers a full range of features to protect drivers in a collision. Zone Body construction

includes crumples zones to absorb impact energy. In the cabin, front seatbelts have pretensioners

and load limiters, while SRS dual airbags offer another layer of protection. Plus active head

restraints move forward to support the head in a rear impact.

Bright halogen headlights maintain visibility at night or in bad weather, while windshield wipers

automatically adjust to customer’s speed to give them a clear view in the rain. High-mounted

stop lamp clearly warns following drivers when drivers apply the brakes. Brake assist adds extra

stopping power in emergency situations. And two systems help assure control under hard braking

or when swerving to avoid obstacles: ABS (Anti-lock Braking System) prevents wheel lockup

and skidding while EBD (Electronic Brake force Distribution) helps compensate for heavier

loads.

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For this model of car, ABC Motors Ltd can adopt a low cost leadership strategy since as

compared to the other models of cars ABC Motors market, it cost less. Also, it can adopt the

same approach as Toyota for a low cost strategy. Toyota was at a time a low cost producer in the

industry. Toyota achieved its cost leadership strategy by adopting lean production, careful

choice and control of suppliers, efficient distribution, and low servicing costs from a quality

product.

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Chapter 4: Recommendations &

Suggestions

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Chapter 4: Recommendations and Suggestions

4.1 Recommended strategy for ABC Motors Ltd

One strategy that ABC Motors Ltd can put into practice is to implement a Car Allowance Rebate

System (CARS) that many countries worldwide have already adopted such as European

countries. Such a system implies that old cars owners (for example cars built before the year

1995) can go to ABC Motors Ltd to negotiate a price that they can get for their new car and their

rebate will be paid when their old car is scrapped. Such a strategy will be unique in the

Mauritian market. Eventually the company may sell the old cars to less developing countries

such as Kenya, Madagascar and Mozambique where it intends to expand. Furthermore this

strategy would enhance the reputation of ABC Motors Ltd in the sense that there will be fewer

emissions vehicles on the Mauritian road and inefficiency would be removed (in terms of high

maintenance costs).

In addition, going overseas means that ABC Motors Ltd needs to choose between different

strategies that will be most suitable for it. Since the company intends to locate in Kenya,

Madagascar and Mozambique which are new markets for ABC Motors Ltd, going into strategic

alliances (more precisely joint ventures) with domestic firms in these countries will be more

beneficial for ABC Motors Ltd. This is so because of the associated benefits of such an alliance

which are discussed below.

ABC Motors Ltd can gain access to these countries’ market from host country’s

government to import and market products locally due to the fact that they are the lesser

developing countries and they can learn from the expertise of ABC Motors Ltd.

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Take advantage of partner’s local market knowledge and working relationships with key

government officials in host country. It is very important to get working relationship with

local government officials (social capitals)

Capture economies of scale in marketing, when they operate together, they can use the

same marketing channel

Fill gaps in technical expertise or knowledge of local market; they will learn technical

knowledge from each other. Moreover the foreign firms have all information on cross-

country differences in cultural, demographic, and market conditions

Share distribution facilities and dealer networks, they can use the same agent or retailers

to reduce the logistic cost and penetrate the market more easily, they can use the put-

together technical and financial resources to attack the rivals

Can reduce the cost and more efficient to penetrate the market by doing the followings:

Joint use of production and distribution facilities

Marketing/Promoting one another’s products

Easier access to target markets. Introducing the product into a new market can be

complicated and costly. It may expose the enterprise to several obstacles such as entrench

competition, hostile government regulations and additional operating complexity. There

are also the risks of opportunity costs and direct financial losses due to improper

assessment of the market situations.

Winning the political obstacle. Bringing a product into another country might confront

the enterprise with political factors and strict regulations imposed by the national

government. Some countries are politically restrictive while some are highly concerned

about the influence of foreign firms on their economics that they require foreign

enterprises to engage in the joint venture with local firms. In this circumstance, strategic

alliance will enable enterprises to penetrate the local markets of the targeted country.

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Achieving synergy and competitive advantage. Synergy and competitive advantage are

elements that lead businesses to greater success. An enterprise may not be strong enough

to attain these elements by itself, but it might possible by joint efforts with another

enterprise. The combination of individual strengths will enable it to compete more

effectively and achieve better than if it attempts on its own. For example, to create a

favorable brand image in the consumer’s mind is costly and time-consuming. For this

reason, an enterprise deciding to introduce its new product may need a strategic

arrangement with another enterprise that has a ready image in the market.

4.2 Implementing the Strategy

Putting a strategy into place and getting ABC Motors Ltd Ltd to execute it well call for a

different set of managerial tasks and skills. While managers’ approaches of ABC Motors Ltd

should be tailor-made for different situation, certain bases have to be covered no matter the

circumstances and these include:

4.2.1 The Structure of a Strategic Alliance Agreement

Before one enter into a strategic alliance agreement, the terms should be outlined in a formal

document that sets out what each party expects to bring to the strategic alliance. The agreement

can take either of two formats. The one you agree upon will most likely depend on the size of the

companies involved, how long you’ve both been operating, and the types of products or services

being offered through the strategic alliance agreement.

• Loosely defined strategic alliance agreements -- New or small businesses may prefer to

have an agreement that is broad and loosely defined, so as to allow the partnership to

grow in new directions as their business evolves.

• Tightly defined strategic alliance agreements -- Larger or older businesses, or those in

evolving technology fields, may fare better with a strategic alliance agreement that spells

out the precise scope of the strategic alliance and all the details of how it will be

accomplished.

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No matter which type of strategic alliance agreement suits ones situation, it should include an

establishing strategy-supportive policies and procedures:

• An agreed common goal - both the domestic company and ABC Motors Ltd need to share

a common vision when going in an alliance. This is very important because the 2 firms

would be working together, share knowledge and expertise. Thus working in the same

direction would imply that the companies are on the right track to achieve their objectives

than having two different visions which will eventually lead to both firms being apart in a

near future.

• A defined role for each partner in accomplishing that goal

• The parameters of working toward that shared goal

A tightly defined strategic alliance agreement may also:

• Identify key steps that each partner will take to meet the requirements of the strategic

alliance agreement;

• Include a time frame for achieving those key steps,

Outline each partner’s accountability by including consequences for "worst-case

scenarios" such as missed deadlines, budget overruns, or products not delivered as

promised or in the format expected;

• Provide a framework for resolving conflicts if they occur.

4.2.1.1 A more detailed step-by-step strategic alliance formation is shown below:

Strategy Development: Strategy development involves studying the alliance’s feasibility,

objectives and rationale, focusing on the major issues and challenges and development of

resource strategies for production, technology, and people. It requires aligning alliance

objectives with the overall corporate strategy.

Partner Assessment: Partner assessment involves analyzing a potential partner’s strengths

and weaknesses, creating strategies for accommodating all partners’ management styles,

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preparing appropriate partner selection criteria, understanding a partner’s motives for

joining the alliance and addressing resource capability gaps that may exist for a partner.

Contract Negotiation: Contract negotiations involves determining whether all parties

have realistic objectives, forming high calibre negotiating teams, defining each partner’s

contributions and rewards as well as protect any proprietary information, addressing

termination clauses, penalties for poor performance, and highlighting the degree to which

arbitration procedures are clearly stated and understood.

Alliance Operation: Alliance operation involves addressing senior management’s

commitment, finding the calibre of resources devoted to the alliance, linking of budgets

and resources with strategic priorities, measuring and rewarding alliance performance,

and assessing the performance and results of the alliance.

Alliance Termination: Alliance termination involves winding down the alliance, for

instance when its objectives have been met or cannot be met, or when a partner adjusts

priorities or re-allocated resources elsewhere.

4.2.2 Budgeting

Another important aspect is budget when implementing the strategy. A budget needs to be

allocated for the successful implementation of the strategy. Developing budgets to steer ample

resources into those value chain activities is critical to strategic success. Organizations successful

at implementation are aware of their need to fund their intended strategies For instance

implementing the Car Allowance Rebate System, the management of ABC Motors Ltd needs to

make provision for a budget as such a system includes costs such in terms of:

Advertising costs: to advertise in the Mauritian market that CARS is a new package

available to old car owners. Moreover shared-advertising costs with foreign firms

alliances in their domestic markets

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Logistic costs: Logistics is the management of the flow of goods between the point of

origin and the point of use in order to meet the requirements of customers or

corporations. It includes the integration of information, inventory, warehousing, material

handling and often security. All these bear costs that the company needs to incur.

4.2.3 Human Resources

Employees may view alliances as a direct threat to their jobs. The management of ABC Motors

Ltd needs to communicate to its employees about its decision to enter into foreign markets as

joint ventures. Management needs to reassure its workforce that any alliances would not pose a

threat to their job (but it may be the case if workers are too many for the amount of work).

Managers should motivate people in ways that induce them to pursue the target objectives

energetically and, if need be, modifying their duties and job behaviour to better fit the strategy

requirements of successful execution. For instance, top managers may make their senior

managers as regional managers in the foreign firms.

4.2.4 Monitoring and Control

Monitoring and control helps management to measure whether their strategies are being met.

Monitoring and controlling the strategy includes a periodic look to see if the company is on

course. It also includes consideration of options to get a strategy once derailed back on track.

Those options (listed in order of increasing seriousness) include changing the schedule, changing

the action steps (tactics), changing the strategy or (as a last resort) changing the objective.

4.2.5 Linkage - The Foundation for Everything Else

Many organizations successfully establish the above four supporting factors. They develop the

structure of the alliance, fund their strategies through allocated budget, take a close look at their

human resource needs, and develop a plan to monitor and control their strategies and tactics. And

yet they still fail to successfully implement those strategies and tactics. The reason, most often, is

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they lack linkage. Linkage is simply the tying together of all the activities of the organization to

make sure that all of the organizational resources are "rowing in the same direction."

It isn't enough to manage one, two or a few strategy supporting factors. To successfully

implement your strategies, one needs to manage them all.

Strategies require "linkage" both vertically and horizontally. Vertical linkages establish

coordination and support between corporate, divisional and departmental plans. For example, a

divisional strategy calling for development of a new product should be driven by a corporate

objective, calling for growth, perhaps, and on knowledge of available resources; capital

resources available from corporate as well as human and technological resources in the R&D

department.

Linkages which are horizontal, across departments, across regional offices, across manufacturing

plants or divisions – require coordination and cooperation to get the organizational units "all

playing in harmony." For example, a strategy calling for introduction of a new product requires

the combined efforts of and thus coordination and cooperation among – the R&D, the marketing,

and the manufacturing departments.

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Chapter 5: Conclusions

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Chapter 5: ConclusionIt is no secret that ABC Motors is experiencing success for the last few years and has established

itself as one of the leading and best leaders in the Mauritian market. The company is famous for

its Nissan brand. The organization has been able to adapt itself to different situations for the last

decade for it to enjoy success. However the trend since the last decade has changed

significantly. Competition has become fierce accompanied by a higher cost of living. The

recent financial crisis also has accounted for a change in the automobile industry. Due to higher

cost of living, luxury car provider such as Leal and Co. Ltd (in partnership with United Motors

Ltd) has included Kia cars in its product line to offer people quality cars at competitive prices.

Such a move has long been done by ABC Motors as it provides not only luxury and sports cars

but also cars appealing to medium income earners. Now it is high time for ABC Motors to

differentiate itself from that of its competitors. One method as suggested above is to implement

the Car Allowance Rebate System (CARS) which would be unique in Mauritius. On the global

perspective, the rise of the Indian car industry has made the country to overtake China as a car

exporter, exporting 201,138 cars in January-July against China’s 164,800 cars in the year 2009.

India introduced the cheapest road car in the world today in the name of “Tata Nano” produced

by Tata Motors. The Tata nano car received much media attention due to its low price (100,000

Indian rupees). This no frills auto was brought down by dispensing with most nonessential

features, reducing the amount of steel used in its construction and relying in low-cost Indian

labour. It is early this year (January 2011) that the car was made available to buy throughout

India. Maybe automobile companies in Mauritius would negotiate with Tata Motors to have the

license to sell such car in Mauritius in a very near future. This would result in a significant

change in the industry in the sense that it would provide an opportunity for new car ownership

for people who would otherwise never own one. The company that would be successful to strike

such a negotiation is sure to have a significant sales growth and eventually higher profitability.

44


References/Bibliography:

Thompson, N. (2008), ‘HR SWOT Examples mainly in Recruitment’, Simple HR Guide,

2008 (accessed from www.hrmadvice.com)

QuickMBA. (2010), ‘Strategy – SWOT Analysis’, QuickMBA Strategic Management,

2010 (accessed from www.quickmba.com)

Walsh, J. (1992), ‘The pursuit of a benchmark: how Nissan/Infiniti developed its service

standard’, Economist Intelligence Unit N.A. Incorporated, ISSN: 0300-3922, 1992

http://EzineArticles.com

ABC Motors Ltd, Group Profile [online]. Available from:www.abcmotors.mu [Accessed

23rd September 2011]

Oxford University Press (2007), PESTEL analysis of the macro-environment [Available

from:

http://www.oup.com/uk/orc/bin/9780199296378/01student/additional/page_12.htm]

Kaur, I. (2009), ‘PESTLE Analysis of automobile sector in India’, Lovely Institute of

Management, Term Paper, December 2009

http://fazeer.wordpress.com/2009/10/06/the-rise-of-the-indian-car-industry/

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http://fazeer.wordpress.com/2009/10/06/the-rise-of-the-indian-car-industry/

http://www.oup.com/uk/orc/bin/9780199296378/01student/additional/page_12.htm

http://EzineArticles.com/

http://www.quickmba.com/

http://www.hrmadvice.com/

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