Company XYZ is a foreign car manufacturing company operating in India. XYZ is producing and selling cars

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Question:

Company XYZ is a foreign car manufacturing company operating in India. XYZ is producing and selling cars to the middle and upper-class income group.

In 2008, 2009 and 2010 the sales of the company XYZ remained stagnant with no remarkable increment. Although the overall car industry growth rate was not encouraging but few companies like Maruti and TATA were doing fine business in the same sector. Most of the competitors, in the segment, followed the cost-minimization strategy. XYZ vehicles are perceived to be slightly costlier than the competitors.

The overall corporate strategy of XYZ was to grow to remain top five positions in the middle-income segment of market, but the current trend seems to be taking XYZ down to tenth position.

The strategic team in XYZ proposed a big strategic project to design and produce a low cost model that would keep XYZ at par with the competitors. The cost of the project will be nearly INR 45,00,000. The R & D team was confident that the new product can be developed and successfully launched in the market within 9 months.

The proposal received severe criticism within the company. During the meeting the critics told that if the new product is launched the competitors will soon react by launching their own versions of cheap cars and XYZ will be back to the same position. So, it was better to improve the efficiency of the current and increase sales by aggressive marketing. “With the same money we can have 10 different operational projects of smaller size” shouted one of the marketing manager.

The Strategy team in reply to the criticism strongly urged that although the existing products picked up the sales, their market position will not be significantly, so any how they needed a new product to remain in top five position. So, the projects to improve the current operational deficiencies are needed but priority should be given to the new product development.

At the mean time, one of the marketing employees brought the news that TATA has already started working on the very cheap version of the four-seater car. He said “that seems to be targeted for lower middle income group or lower income.

Now XYZ will not be able to compete with TATA product so better wait and see their product instead of developing a new product design in the existing middle income sector & changing the target segment to broad target, differentiation should be our strategy-but not simple low cost.”

One of the team members suggested that because there is overcrowded in family cars- Sports Car should be designed for the growth in the Indian market.

The R & D team will insisted that new product should be developed in a very cheap version, because there is demand in this sector and will boost the sales. If there is competition from TATA it will not make big difference because there is still demand. They insisted that XYZ should stick on low cost strategy let it be for middle income or lower middle income.

Q.No.1. In the case given above for XYZ, out of the following options as led down, which option will you suggest for 2011? Give reason.

A. The operational projects as well as the new product development project B. Only the operational projects and no new product development C. Only new product development project.

Q.No.2. Make a strategic evaluation of the strategies of Cheap Version Car Vs Design & Efficiency up-gradation categories of XYZ with the inclusion of appropriate questions (refer to session 3 lecture notes-include at least 5 criteria ) as per the format below and suggest your selection of project by score model.

Strategic Evaluation Matrix(Excel Sheet/Word file)