FIRST CHOICE

FIRST CHOICE

1. EXECUTIVE SUMMARY
1.1 Overview of Indian Automobile Industry
On the canvas of the Indian economy, automobile industry occupies a prominent place. Due to its deep forward and backward linkages with several key segments of the economy, automotive industry has a strong multiplier effect and is capable of being the driver of economic growth. A sound transportation system plays a pivotal role in the country's rapid economic and industrial development. The well-developed Indian automotive industry ably fulfils this catalytic role by producing a wide variety of vehicles: passenger cars, light, medium and heavy commercial vehicles, multi-utility vehicles such as jeeps, scooters, motorcycles, mopeds, three wheelers, tractors etc.
Continuous economic liberalization over the years by the government of India has resulted in making India as one of the prime business destination for many global automotive players. Over the past few years it has been seen that Indian Car Industry is growing at a rapid rate and has built a strong foundation for low cost manufacturing and engineering competitiveness thus attracting many global original equipment manufacturers (OEMs) like GM, Toyota, Honda, BMW, Nissan, etc., to leverage the India opportunity across the value chain. Car component industry has also grown both domestic as well as on the export front. Its strength in technology intensive parts is making India a component sourcing hub for most global OEMs. Thus this car industry is becoming one of the leading export hubs for the global community.
The automotive sector in India is growing at around 18 per cent per annum. The cumulative annual growth rate of production of the automotive industry from the year 2000-2001 to 2005-2006 was 17 per cent. The cumulative annual growth rate of exports during the period 2000-01 to 2005-06 was 32.92 per cent. The production of the automotive industry is expected to achieve a growth rate of over 15 per cent in 2007-08. The export during the same period is expected to grow over 20 per cent.


1.2 Advantage India
India holds huge potential in the automobile sector including the automobile component sector owing to its technological, cost and manpower advantage. Further, India has a well-developed, globally competitive Auto Ancillary Industry and established automobile testing and R&D centers. The country enjoys natural advantage and is among the lowest cost producers of steel in the world. At present there are 15 manufacturers of passenger cars & multi-utility vehicles, 9 manufacturers of commercial vehicles, 14 of 2/3 wheelers and 14 of tractors besides 5 manufacturers of engines. The industry had an investment of more than Rs. 50, 000 crore in 2002-03 which is slated to go up to Rs. 80,000 crore by the year 2007. The Indian automotive industry has already attained a turnover of Rs.1, 65,000 crore. The contribution of the automotive industry to GDP has risen from 2.77% in 1992-93 to 5% in 2005-06.
The automobile manufacturers have set up a manufacturing capacity of over 95 lacs vehicles per annum. Today, India is the world's second largest manufacturer of two wheelers, fifth largest manufacturer of commercial vehicles, manufactures largest number of tractors in the world and is the fourth largest passenger car market in Asia.

1.3 Nature of Used Car Market in India
The Indian used car market was much disorganized and characterized by the lack of transparency and choice. Small-time dealers dominated it. A customer looking for a used car:
• Was not given a choice of cars
• Could not be sure of the technical condition of car being shown to him
• Could not check the background or legality of the previous owner
• Did not have the benefit of dealing with an organized, national-level player.
Since the players were out to make a fast buck, dealings were not transparent and there was no concept of providing after-sales service for the used cars being sold.
2. COMPANY DESCRIPTION (First Choice)
First Choice (formerly AutoMartIndia) aims to provide a wide choice of used cars to consumers, and bringing about transparency, trust & peace of mind in the Indian used car industry. First Choice is a part of 2 billion dollar Mahindra group, one of leading automobile player in India. The other promoters include HDFC, the most respected financial institution in country and Sah & Sanghi, known for their retail operations in Mumbai.
While it launched its web version of the used car market place, First Choice in August 1999, it followed this up with a physical presence with a retail outlet in Mumbai in April 2001. With five company outlets to date - in Mumbai, Delhi, Chennai, Bangalore, and now Pune - and a planned 48 in three years’ time, First Choice intends to lead the market in the used car business.
For now, it is the only brand-neutral used car initiative in the organized sector that intends to go national, and the only one with its hybrid model - online and offline - of business.
The difference is of focus. For the likes of Ford, it can only be a side business, in as much as it helps them sell the Ford brand of cars. For First Choice, on the other hand, used cars are its only business, hence all its efforts will be centered on offering a wide range, and meet every customer's requirement for such a car - make, model, price, service. "Their core competency is in new, ours is in the old," he reiterates.

This kind of focus is to be translated through the infrastructure that the company provides for the products, and the services that go with it. The outlets, for instance, are large, modern and inviting. Each outlet is to be about 20,000 sq ft in area, comprising of showroom and stockyard, with capacity to accommodate and display 100 cars at a time. It has the right ambience and amenities to attract the whole family. “A car is the second most important investment for an Indian family, after a house”.
Thus, apart from the pleasant surroundings that are laid out for prospective customers, the amenities will also include an area for kids to play while their parents look for a good buy. That's for atmosphere. For every vehicle that the company sells, it carries out a full document check complete with RTO extracts, accident history and insurance records, a thorough vehicle checking and evaluation against 118 parameters on the components, mechanism, body and upholstery. The vehicle is fully overhauled and refurbished before being sold, so that the buyer will take home a valued means of mobility rather than a liability. Financing options too are also made available on the premises, so that each vehicle would come complete with a makeover, financing, certification, online registration and a six-month or 8000 km warranty on the engine, gearbox and transmission of the car.
With all these measures, First Choice hopes to restructure the used car business, and infuse credibility into a market that is now fragmented, has an unorganized and disparate body of brokers and dealers, lacks transparency, and has no benchmarking system to evaluate its products - which First Choice hopes to re-write.
With an estimated market size of 1.2 million cars annually, twice the size of the new car market, the potential is unlimited. Fuelled by factors such as increasingly shortening life cycle of new cars - from 15 years a few years ago to six years now -- and getting shorter by the day, a range of new models cars coming in every day, and the increasing number of people aspiring to upgrade from two to four wheelers, the expected annual growth rate is a promising 15 to 20 per cent. "Forty per cent of all new buyers need to sell their old cars," says Mr. Sanghi, pointing to the possibility, and the need for an organized market player.

Car selling is going to be about being present in the entire ecosystem. So, the company has decided to offer a complete buying experience to its customers, hence came up the multi-brand retail outlets, a concept unheard of then. Unlike in India, where a typical secondhand car dealer has merely seven to eight models on display, First choice developed markets like the US customers have as many as 7500 cars to chose from, refurbished and ready to sell. With these initiatives it was expected that the dynamics of the secondhand market, is all set to change. It has all just started and most of the expansion has happened in the last two to three years. The organized players’ share in the used car market is set to grow, the way it has grown in all the developed car markets of the world. Eventually, even the unorganized players would get organized or they would perish.

3. COMPANY OBJECTIVES
FirstChoice Ltd. was founded with three objectives:
1) To professionally organize the used car industry in India.
2) To bring about transparency, trust & peace of mind in the Indian used car industry
3) To offer a wide choice of used cars to the Consumer
First Choice recognizes that car purchase is a critical decision for most Indian families. Owing to this, each of FirstChoice's outlets has been designed to offer a happy shopping experience. M&M got into this business from the sole perspective of getting a 5 to 6 percent market share in the used car industry, the size of which is estimated to be a million units and is growing at the rate of 15%. FirstChoice plans to sell around 18,000 to 20,000 cars and clock a turnover of Rs 200 crore by the end of 2007.
First choice always believe in customer-centricism and these stores which aim at offering a lifetime buying experience is a manifestation of that philosophy. Consumers would always look at buying it from organized players who can boast of showrooms as big as 10,000 square feet, with swanky premises. Over the years, there has been a remarkable shift in the dynamics of the pre-owned car business. While earlier, in the absence of availability of new models, a consumer would be tied down with a particular car for decades, as choices were limited. But today with as many as 45 new models launched in a single year, the consumer has a lot to choose from. This has reduced the transaction cycle of cars substantially and given a huge fillip to the business of pre-owned cars.
With the consumer getting more brand conscious, what would be interesting to watch is if the likes of Reliance and Wal-Mart which have ambitious plans for the retail sector, make similar forays vis-à-vis multi-brand super stores for new cars.

4. VISION AND MISSION
The Company’s Mission is to create India’s largest automobile and automobile related products distribution network by providing dealers and customers with the largest choice of unique world-class products and services. The company achieves its objectives by providing consumers with a wide choice of good quality used cars and by bringing about trust and transparency in each of its dealings.
The Company’s Vision is to become India's leading company for second hand automotive products ensuring quality and responsiveness to the customers.

5. CORE COMPETENCIES
First Choice seeks to use its core competencies to achieve a sustainable competitive advantage in which competitors cannot provide the same value to the customers that First Choice does. It has the following core competencies:
1. Simplifying the process of buying and selling used cars.
2. Offering the used car customer a value proposition and a wide choice of vehicles, transparency, and assurance.
3. Focus on having a national presence with its online and offline business model.
4. Using used cars as its only business to empower value driven growth.
5. To meet every customer’s requirements- make, model, price and servi


6. SWOT ANALYSIS
STRENGTHS:
 Only multi-brand used cars retail player in the organized market.
 The name of Mahindra &Mahindra to back up.
 Gives credibility and transparency in the highly disorganized used car market.
 Provides finance and warranty on used cars.
 Supply & Fitment of a wide range of car Accessories.
 One of the largest networks of company owned and franchisee dealership network which gives it access in all the major cities.
WEAKNESS:
 Not the first used car portal.
 People prefer new cars over used cars.
OPPORTUNITIES:
 Product diversification (tractors, SUVs)
 Tap the prospective buyers (motorcycle users to used cars)
 Just 10% of market by organized players, hence a huge market potential to tap
 Partnership with other automobile companies (Ford and General Motors)
THREATS:
 Comparatively a new entrant in used car business.
 New players planning to enter the market.
 Leadership of Maruti’s True Value in this market.

7. COMPETITOR ANALYSIS
7.1 Unorganized market
This consists of three types of dealers:
1. Dealers who sell both new and used cars- With the market of new cars seeing a steady climb-down, these dealers increasingly try to make up their profits through this segment. The advantages on offer are that they are thoroughly inspected; give a larger choice, and also service and maintenance warranties. You can insist on confirmation to tax and pollution laws. The condition of these cars is generally better than those offered by others.
2. Dealers who deal in only used cars- The condition of the cars offered by these dealers are a shade worse because they operate on low profit margins. Most of these cars are in bad shape, with shady workmanship to gloss over the defects. Never buy these until your mechanic vouches for their veracity.
3. Individual owners- Classified advertisements or our Free Classifieds section is as good a place to look out for individual sellers as any. The price they ask for will generally tend to be lower than that demanded by dealers. People generally have a chance of netting a cool bargain if they persist long enough on this route.
The used car market is mainly formed by unorganized players (around 90%) who have presence in even small and remote locations of India. They provide facilities of negotiations and bargaining which is generally absent in the organized market
7.2 Organized market
The used car market is popping up across India, with different organized players giving the concept a try. Global auto majors are increasingly looking for potential buyers of their vehicles in India’s used car market.
The used car market in the country, which is dominated by Maruti’s True Value program, with most sales and most number of outlets in the country for used cars, has started to see more participation from the likes of Toyota, Honda, Hyundai, and Ford. While Japanese auto major Toyota is hitting the used car mart with its Toyota You Trust brand, it will have stiff competition from Honda’s Auto Terrace, Hyundai’s Hyundai Advantage and Ford’s Ford Assured.
Toyota’s You Trust venture is expected to be rolled out at leading dealerships across the country in end of 2007 with the company having identified a handful of dealers who will invest and set up operations for used cars.
Meanwhile, Honda has formed a new team to focus on its used-car program called Auto Terrace. The company’s used-car program, that is currently running in a small way, is expected to be accorded an added focus.
The reason for the increased focus on the used car mart is the exchange offers. According to reports, exchange offers are the primary reason why leading auto majors enter the used-car market. Eyeing a bigger share of the used car market, these major companies are also set to sell pre-owned cars at a profit.
Statistics say that the used-car market stands at a huge one million units. In such a scenario, it has been felt that the auto industry expects the used car industry would grow as fast as the passenger car segment. Estimates are that, out of the 2 lakh units in the organized market, Maruti sells more than 90,000 used cars units through its True Value network. Maruti’s True Value has met with a huge success and acceptance in the market. Now with the entry of Ford Assurance, Hyundai Advantage, along with Honda and Toyota’s ventures, it is likely that the space gets to see some positive competition.
7.3 Challenges prevailing in this sector:
The challenge in the used car industry lies on the supply side (where to source cars from) rather than demand side as customers are queuing up. In order to tackle this, First Choice has forged tie-ups with several of the new car dealers. Its representatives at these dealerships help customers trade in their old models.
Buoyed by the growing popularity of secondhand cars, of late, several manufacturers including Honda Siel Cars, Hyundai and Ford are in this space and others like GM and Tata Motors have said they are keen on getting into the same. Maruti has been one of the earliest entrants into the segment and its secondhand car outlet True Value has a keen presence.
While most of them sell only their own brands, M&M, which is eyeing a bigger pie in the pre-owned car space, has chosen the multi-brand route and quality and choice as its USP to make a dent in the one million unit used car industry, more than 70 percent of which is in the unorganized sector presently.

8. TARGET MARKET
“Marketing management is the art and science of choosing target markets and getting, keeping, and growing customers through creating, communicating, and delivering superior customer value”, we can see the importance of target market in any field said Philip Kotler.
First Choice is looking to aggressively tab the 70 lakh people who buy motor cycles today, but could buy a used car tomorrow and is targeting annual sales of 1 lakh cars a year by 2012. The product will cut across all geographical segments. It is targeting at both the urban as well as rural consumer
The target market is mainly divided into 3 parts:
a. High income (urban population): These are the people whom the first choice is targeting to get the used cars from which there is a greater chance of availability of the automobiles, as the high income level population changes the model when ever a new model arrives. The company also targets the crazy people who really want to change the car when ever a new car comes to the market.
b. Middle income: This segment of people comprises of salaried employees, middle management people who want to go for the bog products and brands at any cost to showcase their status symbol. The main objective of these people is to get the most value to their money so there is a chance of first choice to cater to their needs by providing the platform in an organized way with an add in value of certification brand.
c. Low level income: This segment of people who are the salaried employees with a lower level of income, who are using motor bicycles today and hoping for cars tomorrow and can get attracted by the price tags of the company’s products, which is an important element in marketing mix.
d. Niche Segment: These include the following :
I) The people who change their automobiles frequently because of craze want to sell their used ones, whom the First choice can target by providing a platform in a healthy way so that they reduce the middle man charges to a great extent as there is an organized way of retailing their ones.
II) The people who look for two wheelers, like students, temporary job holders, rural people where the conditions of roads are bad and working executives who don’t want to get their vehicle at a short term investment are the markets which First choice can target with their credibility of certifying the vehicles and providing other add on values.

9. MARKETING MIX
9.1 Product Strategy
FirstChoice currently offers all kinds of models of cars from Maruti 800 to Mercedes in its used cars range making it the only player in the organized used car market with this feature. The detailed information about whole range of available cars is available on the website of the company which can be accessed by the consumers. Cars with latest model and colours are provided by FirstChoice. The company can tie up with other automobile companies to increase the product line. The Mahindra Automobile is in the business of trucks and SUVs which can also be included in the product range in the future.
Along with the cars, FirstChoice also provides other services like warranty, finance, insurance, RTO registration, online evaluation and buying tips for the convenience of the customers.

9.2 Distribution Strategy
Today's customers shop and buy very differently than ever before. Their access to high-quality information via the internet, combined with their heightened price sensitivity, has created a customer which is more sophisticated, better informed and often times, more adversarial than customers of the past. This new breed of customer no longer plays by the rules of traditional distribution channels. FirstChoice has made its distribution strategy on the basis of these factors.
9.2.1 Distribution Intensity
There are three broad options - intensive, selective and exclusive distribution:
Intensive distribution aims to provide saturation coverage of the market by using all available outlets. Intensive distribution is usually required where customers have a range of acceptable brands to choose from. In other words, if one brand is not available, a customer will simply choose another. So, the different range and brands of products are available in First choice with different price range and age of the products. So this type of distribution is best suitable for First choice.
Selective distribution involves a producer using a limited number of outlets in a geographical area to sell products. An advantage of this approach is that the producer can choose the most appropriate or best-performing outlets and focus effort (e.g. training) on them. Selective distribution works best when consumers are prepared to "shop around" - in other words - they have a preference for a particular brand or price and will search out the outlets that supply.
This is however not much appropriate for First Choice as customers are generally aware of the type of Car, budget limits, and specifications etc. of the car they want before they decide to buy from First choice. Because it’s not the producer which chooses the distributor but the customer who chooses the distributor which is again go the customer itself at a different price.
Exclusive distribution is an extreme form of selective distribution in which only one wholesaler, retailer or distributor is used in a specific geographical area. First Logan can use this type of distribution from the outlets it has made as the different types of products along with different price range products are available with them which can be used by using this type of distribution.
9.2.2 Distribution centers
The company has around 80 outlets spread across 54 locations throughout India and plans to open six superstores similar to the Mumbai outlet throughout the country in the next few months with the Delhi superstore already started in Okhla. In order to retain customers (for sale of existing cars and purchase of new cars), the company has tied up with 150 dealers across the country to offer that one-stop solution to all existing car owners. The company intends to form, maintain and monitor long term relationship with the distribution channel members.
The Mahindra First Choice is available in following locations in the form of direct and dealers retail stores:
Ludhiana, Jodhpur, Ahmedabad, Rajkot, Jamnagar, Mumbai, Pune, Goa, Mangalore, Cochin, Trivendrum, Dehradun, Delhi, Agra, Noida, Gurgaon, Lucknow, Allahabad, Udaipur, Baroda, Nagpur, Raipur, Aurangabad, Thane, Vashi, Kolhapur, Hyderabad, Vijaywada, Hubli, Chennai, Bangalore, Coimbatore, Kanpur, Solapur, Jalgaon, Amravati, Akola, Panvel, Satara, Sangli.

9.3 Promotional Strategy
No business has an unlimited amount of money to spend on its promotions. It is important to direct all the efforts and money to the target market. So FirstChoice focuses in identifying the target market and the possible ways to reach to them and to get their attention and influence their behaviour.
The company’s earlier brand name, AutomartIndia did not reflect M&M’s differentiated value proposition for both buyers and sellers. The new name has been adopted with the aim of creating a distinction identity in a market full of similar sounding entities.
The FirstChoice communicates with the consumers and dealers about their products and services in a variety of ways. Information about the company and services is available on the internet and in person through retail outlets.
Cars of all the brands and models from the quintessential Maruti 800 to high end premium luxury brands are available in the FirstChoice stores. No other organized used car retail player has this feature in their services. This provides more choices at affordable prices to the customers. This facility is being promoted as the USP of FirstChoice.
There are various ways to communicate with potential customers. Promotional strategy includes advertising, publicity, sales promotions, personal selling, and public relations. Each component of the promotional mix plays a role in the effort to have potential customers learn about the business and buy goods or services.
Maintenance of a car and the cost incurred on it is a cause for concern for every car buyer, especially a person buying a used car. In order to give comfort and peace of mind to used car buyers, FirstChoice has pioneered the concept of Warranty on used cars. The warranty product has been branded as UMBRELLA WARRANTY.
Right ambience and amenities are provided to attract the families. Thus, apart from the pleasant surroundings that are laid out for prospective customers, the amenities at some stores also include an area for kids to play while their parents look for a good buy.
The company also provides ongoing promotions so that existing customers are kept informed about developments in the business. Special promotions like mega carnival where a large number of cars, of all makes, and suiting different budgets, are displayed under one roof, thus providing a wide choice to consumers.
With the opening of new stores, the company has now started with more intense promotions using TV and print advertising. The ads have been made with a family buying perspective in mind and are gaining the attraction of people. First Choice is to invest Rs 10 crore across various media channels. It is about to tie up with Indiatimes.com as a preferred partner for used car sales on the World Wide Web. They are also in talks with leading used car Web sites like eBay Motors and carwale.com to expand their services across various channels in the used car market.
The promotional budget is an important part of the promotional strategy. The best way to determine the promotional budget is to identify what a company wants to accomplish. This requires defining the targets and then determining the budget accordingly. The first task is to publicise First Choice, by way of which, the company plans to spend Rs 10 crore in the next few months and almost Rs 20 crore by the next year with the opening up of more stores. Auto manufactures are top three spenders on the television. One of the first promotion strategies of the company was to advertise on Neo Sports channel during the India-Australia ODI cricket series. The company claims to have received 25,000 SMS queries in just four days after the TVC air on Neo Sports channel. This was an innovative advertising strategy as a cricket match in India involves high viewership. A used car player advertising on the television is an unusual match but the strategy worked for FirstChoice.

9.4 Pricing Strategy
Pricing is an important strategic issue because it is related to product positioning. Furthermore, pricing affects other marketing mix elements such as product strategy, distribution and promotion.
 Input cost – The fixed and variable costs associated with the services are taken into account to decide the prices. The estimated demand is assumed on the basis of the demographic and geographic factors of the locations where the outlets are being set up.
 Environmental factors - Buoyed by the growing popularity of secondhand cars, of late, several manufacturers including Honda Siel Cars, Hyundai and Ford are in this space and others like GM and Tata Motors have said they are keen on getting into the same. Maruti has been one of the earliest entrants into the segment and its secondhand car outlet True Value has a keen presence. While most of them sell only their own brands, M&M, which is eyeing a bigger pie in the used car space, has chosen the multi-brand route and quality and choice as its USP to attract the customers.
With the consumer getting more brands conscious, it would be interesting to see likes of Reliance and Wal Mart which have ambitious plans for the retail sector, make similar forays vis-à-vis multi-brand super stores for new cars. So it important to analyze the competitors while making the pricing strategy.
Also FirstChoice maintains complete transparency and credibility with consumers. FirstChoice helps the buyer make “an informed buy” by giving him the exact picture of the car. FirstChoice pioneered the concept of warranty on used cars, which is now a benchmark for other players in the organized used car business. As part of its customer-centric efforts, the company provides certification indicating the exact condition of the car, helping customers buy good quality used cars. This helps in minimizing the risk of any legal constraints and problems.
 Pricing objective: The pricing objective of the company is to increase its market share in the sector of organized used car retailing and to gain market share from the unorganized sector.
 Pricing method: The pricing method involved is cost plus pricing i.e. price is set at the production cost plus a certain profit margin which the company requires to maintain the standards of the products and services it is providing. Through FirstChoice, Mahindra provide almost 150 cars from which a customer can choose. Cars are refurbished to a particular standard. They go to a rigorous 118-point check. In addition, every car comes with a one year warranty, so not only a refurbished car is given, but refurbishment is also backed by the warranty. On the other hand, finance, insurance, accessories are also offered; to make it completely a one stop shop. So, the pricing is decided on the basis of age, demand, model, colour and other factors. In terms of pricing, the company challenges to offer favourable prices as compared to its competitors.
Facility of pricing index is available at the website where in people can choose the make of the car and the expected price of the car is made available. This facilitates the buying decision process.

10. BUDGET, SCHEDULING AND MONITORING
Since the company has come into existence for a short span of time, it is difficult to quantitatively analyse the budget and operating cost of the company as the company plans wide scale expansion in the near future. But the main cost of the company would be incurred on setting up new centers, promotional and operational activities.
The company plans to open more outlets in cities like Pune, Hyderabad, Bangalore and Delhi in the next 18 months and more than 200 such retail outlets over a period of 2-3 years. The company has set a goal of selling 25,000 used cars through these outlets by the end of 2009. FirstChoice plans to increase its presence in all the feasible locations in the country and market share to 5-6% by the next 2-3 years. FirstChoice also plans to float an IPO in a couple of years with Mahindra & Mahindra, which holds around 75 per cent stake in the company, expected to increase its stake by another 5 per cent and 10 per cent. The company has set up a 24-hr call centre to cater to queries on the whole process of buying and selling a car.







11. BIBLIOGRAPHY
www.automartindia.com
www.mahindra.com
http://www.thehindubusinessline.com/2005/05/24/stories/2005052401670200.htm
http://auto.indiamart.com/used-car/index.html
http://automobiles.mapsofindia.com/second-hand-car-market-in-india/second-hand-car-dealers.html
http://www.automobileindia.com
http://www.businessworld.in
http://www.dancewithshadows.com/autoindia/used-car-india.asp
http://www.automonitor.co.in/article/FirstChoice-eyes-5-percent-marketshare-by-2012/page1.html
http://www.netmba.com
FirstChoice dealer outlet in Delhi