Growth-Strategy-for-an-Auto-Major
A large C.V. manufacturer in India wanted Valor Consulting to conceptualize and facilitate implementation of strategies to improve market share in their MEMO branded spare parts business Situation Approach Solution O Client Our client Is a large Commercial Vehicles manufacturer In India and had a MEMO branded spare parts business with a turnover of about USED 50 million before the engagement Our client had focused on spare parts as an important business and developed it over the last three decades
Over the past few years, there was a downturn In this market resulting In falling prices and margins for most manufacturers.
Our client also had to resort to price cutting resulting In reduced margins. The turnover had also fallen in the last year Situation Any fall in price will require more than proportionate increase in volumes to protect absolute profits Our client approached Valor Consulting to help turn around their spare parts business by formulating a suitable strategy.
At the end of this exercise, we were relationships with distribution partners, customers and influences in the spare parts aftermarket Strategy formulation and implementation support for a C.V. major in the replacement parts market The broad framework for our engagement – from strategy right through implementation across India Situation Approach Solution Example Framework for Engagement Market Potential for Key Part Lines and Share of client Perception about client in Market Place – Building Brand Equity Workshop with client Managers Phase I Developing the Marketing Strategy Sales Promotion Effectiveness Opportunity to Improve Reach Phase II Implementation across 5 Pilot Locations Channel Management Analysis Phase Ill Scale up on All-India Basis
Competition Analysis 3 Strategy formulation and implementation support for a C.
V. major in the The strategy was developed separately for the two key sub-segments of the business – captive usage by their dealerships and a retail distribution business Situation Approach Solution Example Strategy to Increase Sales Retail Distribution Business Target Setting Prudent Pricing & Service Packages Performance Improvement Improve Efficiency Dealer Portfolio Management Focus on 4 As These were two distinct elements of the engagement – this case focuses on the distribution side of the business 4 Strategy formulation and implementation support or a C.V. major in the replacement parts market We segmented the client brand range into a few targeted product groups based on inputs from the workshop and market characteristics Situation Approach Solution Example Segmentation of client Range Status in the market Leadership 0 Critical parts 0 Significant in house value addition Achieve Leadership / High Market Share 0 Critical parts 0 High consumption Focus will be required 0 Low value parts 0 High consumption Characteristics Examples crankshaft cap 0 Brake Linings 0 Fillers Possibly plagued by high inventory Focus on sales increase of distributor to reduce inventory
Will be the driver for sales of client (in the short term) Focus on range enhancement of distributor to increase sale 5 Strategy formulation and implementation support for a C.V.
major in the We also mapped the price-value perception of client across product groups to identify the value gap to be bridged Situation Approach Solution Example Product 1 – Price Value Perception 80000 70000 60000 Product 1 GAP 0 Market leader is the reference product for mapping the price value graph Value 50000 40000 30000 20000 10000 0 0 5000 Competitor 2 Market Leader 0 Average price for Product 1 across geographies has been considered to map the lots 0 Competitor 2 is perceived to be priced higher than the value it is delivering 10000 20000 25000 Price 6 Strategy formulation and implementation support for a C.V. major in the We identified several products where the price is higher than the value perceived by the market Situation Approach Solution Example Value Perception – Price Matrix Ideal Higher Value Perception (Vs… Market Leader / Market NON) At par Products 5 and 6 Products 4 Product 7 Product 9 Lower Product 1 1 Under Priced Appropriate Market Price Product 8 and 12 Over Priced Pricing Review Powerful OWE brands OWE suppliers dominate market
Source : Valor Consulting Analysis 7 Strategy formulation and implementation support for a C.
V. major in the The key value enhancement initiatives required across each part categories were identified Situation Approach Solution Example Product Group Initiative 1 Initiative 2 Initiative 3 Initiative 4 234567891011 12 OX XX XX XX 000 x x x 00 xx The specific initiatives for client (as a whole) and along specific part categories were elaborated in the strategy 8 Strategy formulation and implementation support for a C.V. major in the replacement parts market We supported the client in piloting and subsequent scaling up of the recommended initiatives ..
. Situation Approach Solution Example Stage 1 Stage 2 Detailed Workshop with field team Stage 3 Implementation Stage 1 : Preparatory activities for implementation were as follows Responsibility Shortlist locations for initial phase of launch Negotiation, ordering for items/ infrastructure for the coupon process and warranty Clarifying the reporting responsibilities , MIS formats Setting up an automated MIS Valor / CIO RPM Co Valor / CO Valor / CO Spelling out clear responsibilities for each member of the chain Analysis of dealer inventory of coupon parts and implications for client to support the stock Standardizing a communication package for the Cars and methodology for periodic updating and training Presentations to top management of large dealers on plan and getting commitment for implementation Valor / CO Valor / RPM Key CO – Corporate Office of client RPM – Regional Parts Manager 9 Strategy formulation and implementation support for a C.V. major in the initiatives …
Situation Approach Solution Example Activities during Implementation (illustrative only) Responsibility Dealer / RPM Obtaining basic data on past sales trends RPM & -ream Small workshop with dealer to set up stretch targets (based on initiatives) and means o achieve the same Mapping of retailers, mechanics and reborn in the region, registration and providing identity booklets Mechanics, retailer meets 10 Strategy formulation and implementation support for a C.V. major in the Overall sales increased by about 15% in the 5 pilot locations put together during the pilot period of three months Situation Approach Solution Example Impact – Results – Initial Period overall sale for 5 Locations 350 315 100 90 80 70 60 50 40 30 20 10 0 companion of Pilot Period vs… Internal Targets for Retail Sale (All fugues in RSI.
Lacks) 90 80 82 65 45 40 25 1080 75 280 275 21002-03 02-03 02-03 Initial Target
Achieved in Pilot Location 3 Location 4 Location 5 Location 1 Location 2 11 Strategy formulation and implementation support for a C.V. major in the Range (Breadth) increase has been observed across many of the locations Situation Impact – Range Increase 0 Number of items sold in Location 1 was Just 80 before the initiatives and has gone up to 220 in April 0 Number of items sold in Location 2 has ranged from 600-800 in the pilot period which is higher than the pre pilot phase (400) 0 Ball bearings, thin wall bearings and repair kit sales which were very low in previous years in Location 3 showed substantial increases 0 Sale of 30 item groups many of them non coupon items) contributing to 75% retail sale in Location 4 has more than doubled in pilot period compared to the previous year 0 Engine items that moved slowly in Location 5 in previous years showed record sales in the pilot period This increase in range gave scope for increasing the gross margins with a concentrated effort to promote specific high margin groups 12 Strategy formulation and implementation support for a C.V. major in the replacement parts market A system to capture data from mechanics was put in place which provided valuable inputs for the dealer once scaled up across all locations Situation Approach Solution
Impact – Granular information from the field Data captured from mechanics Analysis Consumption patterns, volumes Action / Value Building relationship Designing targeted promotions for range Input for identifying potential service centers etc Pilot Scaled Up Overall consumption of parts by individual mechanics Part line-wise consumption by mechanics.
