Competition among multinationals these days is likely to be a three-dimensional game of global chess: the moves an organization makes in one market are designed to achieve goals in another market in ways that aren't immediately apparent to rivals.Global competition occurs when companies cross-subsidise national market share battles in pursuit of global brand and distribution positions.

INTERNATIONALISATIONBusinesses are increasingly operating on a global scale. Competitive advantage of nationsIn global industries the competitive advantage in one country is influenced by its position inothers.Political environmentThe problem facing strategic planners is how to plan for changes in the political environment.

THE DEVELOPMENT OF THE GLOBAL BUSINESSDevelopmentsOne of the most significant developments to occur in business over the past quarter of a century has been its increasing internationalisation.Motives of multinationalsThe reasons why MNCs possess this distinctive advantage are reasonably clear.

GLOBAL STRATEGIESChoosing the most effective market supply strategy is one of the most complex decisions facing the international firm. Standardisation versus customisationA key issue in the development of a global strategy is the extent to which the strategy, particularly the marketing strategy, will be standardised across countries.

AUTOMOTIVE INDUSTRYHigh oil prices in the mid 1990s caused many consumers to shift away from high fuel dependent vehicles like SUVs and Hummers that the US automakers were producing to lighter and more compact cars. Sales dropped dramatically as more and more people preferred the smaller and more fuel efficient Japanese cars to the more high powered American ones. MARKET TRENDSThe changing nature of mobility KPMG's 2012 global survey shows that the automotive industry continues to face environmental challenges, growing urbanization and shifting customer behavior, which calls for radical new approaches to future mobility.New technologyElectrified vehicles will not exceed 15 percent of annual global new car registrations before 2025. COOPERATION AND ALLIANCESFacing the future togetherAs automotive companies embrace electromobility, urban mobility concepts and ubiquitous connectivityEMERGING MARKETSAs expected, 80 percent of respondents see China as the biggest automotive market in terms of both sales and production in 2016. OVERCAPACITY The specter of overcapacity and excess production will haunt the industryGLOBAL CAR SALES IN 2012

JAPAN AND RUSSIA LEAD GAINS GOVERNMENT POLICIES DRIVE ACCELERATION IN CHINA AND BRAZIL NORTH AMERICAN SALES AT FIVE-YEAR HIGHS MEDITERRANEAN VOLUMES CUT IN HALFFUTURE OF THE AUTOMOTIVE INDUSTRYThe green movement has hit the automotive industry as all car manufacturers are focusing their attention on producing more environmentally friendly small cars and fuel efficient vehicles.

GLOBAL COMPETITIVENESS FOR SMALL CARSAs oil prices rise and concerns about the environment grow, the small car is becoming the king of the road. SMALL-CAR REVOLUTIONThe global auto market is already tilting toward small cars, sales of which are growing not just in emerging markets but throughout the world. In India, the average car costs around $15,000, while the average small car costs about $8,000.The impact of this shift to smaller cars on the worldwide auto industry will be dramatic. That shift is the rise of a whole host of carmakers such as Tata and Mahindra, as well as Tier 1 suppliers like Bharat Forge and the TVS Group, forcing a change in long-established patterns of global competition.

With the shift to smaller cars for emerging markets, carmakers must develop new technologies and new business models to meet the demands of these markets. Small cars must be lighter and more fuel-efficient, so manufacturers are turning to such technologies as alternate power trains, fuels, propulsion systems, and braking systems, as well as materials not typically used in cars, including plastics for exterior body components such as doors, and strong, lightweight alloys and composites for structures. The small-car revolution is taking place within the context of the very different needs and desires of the new consumer in emerging markets. INDIA AND THE WORLDNanos price of $2,500, however, puts it well within the realm of possibility for a much larger, and fast-growing, number of households. extending these factors to the entire Indian auto industry will allow India to maintain and extend its position in the small-car market worldwide. Indeed, India boasts certain advantages in its quest for control of the small-car market. India is one of the largest markets for small cars in the world, with more than 8 million households that can afford cars in the $5,000 to $8,000 range. With the introduction of cars like the Nano, and similar vehicles being developed by players such as Toyota, Renault, and Suzuki in the $2,500 to $5,000 range, the number of households that can afford a car will triple. COMPETITIVE ENVIRONMENT Japan, Korea, China, and Thailand are all looking to grow exports to emerging markets. Korea and Japan, especially, have long been strong players in the small-car segment. India is already the second-largest exporter of small cars after South Korea, and its low labor costs give it a significant competitive advantage over South KoreaSUPPORTING THE INDUSTRYIndia must work to promote its auto industry along two lines: The Indian government must support the auto industry by developing policies that can further the industrys small-car goals. And the industry must continue to innovate, developing the means to build more paradigm-shifting products like the Nano.

INNOVATION IMPERATIVEIndian government works to support the countrys small-car market, Indian manufacturers must invest in bringing to market a wider variety of low-cost, high-value products that consistently offer quality, reliability, and durabilitywith style.

For India to play in the global small-car market, and to take share from other players, its cars have to be as good or better than the best in the market, in styling and quality, as well as execution.

GLOBAL COMPETITION FORCED AUTOMAKERS TO IMPROVE QUALITYglobal competition has forced automakers to improve the quality and reliability of their vehicles everything from inexpensive mini-cars to decked-out luxury SUVs.

GLOBAL COMPETITION AND THE POSITION OF INDIAN SMALL CARSSUPERIOR SMALL CAR PORTFOLIO AND COMPETITIVE PRICING ARE KEY FACTORS FOR NEW ENTRANTS IN INDIAThe passenger car sales have crossed two million units in FY 2010-2011, expanding beyond the mega cities. India has been one of the few markets globally to buck the recessionary trend and record a strong 25.6 percent growth in passenger vehicle sales in FY 2010-2011.Driven by new Hatchback launches such as Ford Figo, Toyota Etios Liva, Volkswagen Polo, Nissan Micra etc, the new entrants together have achieved a share of 7-8 percent in the hatchback segment.Industry Composition

Maruti Suzuki, Hyundai Motors, and Tata Motors, currently dominate the Mini and Compact segment.

GM India's Chevrolet Beat, Toyota Etios and Etios Liva, Nissan Micra, and Renault Pulse are the recent launches in the market in diesel variants. This will further boost the market share of the compact car segment passenger vehiclesStrategic Outlookrising fuel prices, increasing interest rates and spiralling input costs may exert some pressure on the automotive OEMs. It is estimated that that the passenger vehicle industry will grow at a CAGR of 12 percent over the next five years.Market driversIndia is likely to emerge as small car production hub:

India is the second-largest exporter of small cars, behind Japan. Compact cars account for majority of passenger car exports from India.Product pricing

Most OEMs targeting the highly-competitive small car segment focus on localisation of key components, which forms an integral part of their strategy and helps them keep the cost competitive.

Key challenges

Prices of core inputs in the manufacture of vehicles, like steel, non-ferrous metals, and rubber have grown over the last few years, which in turn have increased the production cost of vehicles. Such cost escalation in input prices will impact the growth of passenger vehicles. Fuel Price Volatility Rising fuel prices especially petrol prices are impacting the demand for petrol vehicles. Increasing Borrowing RatesAuto loan rates have been further hiked to tame the rising inflation. Infrastructure ConstraintsInsufficient road infrastructure and traffic congestion could prove to be a bottleneck in the growth of the passenger car segmentSuperior small car portfolio and competitive pricing will be the key factors in determining the success for new entrants in the Indian passenger vehicle market.

INDIAS HIGHLY COMPETITIVE SMALL CAR MARKETSouth Koreas automobile maker Hyundai Motors has intensified the competition by launching its hatchback, the EonJapanese automobile giants Toyota and Honda also entered the Indian small car market this year. Toyota came in with the Etios Liva in June, while Honda joined its peer by launching the BrioNissan Motor, introduced its hatchback, the MicraThis growth is being driven by the 160 million strong middle class, which has abandoned its once upon a time prized possession, the scooter, having taken to the steering of four wheels. For the Indian middle class, the rising disposable income and easily obtainable loans have effaced the distance between the dream and the reality of owing a car. Small car sales account for more than 70 percent of the Indian car market. Maruti Suzukis Alto is currently the top selling car in the world and the main driver of the companys high volume sales. India is also transforming into a small car headquarter due to Indians expertise in frugal engineering. Companies are increasingly using their India-based manufacturing unit to manufacture and export. Honda Siel Cars India (HSCI), a joint venture between Honda Motor and Siel Limited, has indicated that it plans to export its newly launched Brio to Nepal and BhutanCEO of Ford Motor, told the press that the company will make India its small car hub.Nissan Motor India started exporting its Made-in-India compact hatchback, the Nissan Micra.

COMPETITION INTENSITY THE KEY CHALLENGE IN SMALL CAR MARKETCost pressure is mounting on small car manufacturers as they attempt to maintain market share through frequent model introductions, in response to competition intensity. Competition Intensifies in Small Cars with the Increase in Number of Models

The level of competition in India's small car market, particularly the A2 segment, has increased significantly as its size and growth potential has attracted several global car manufacturers

Sales Volume per Model will Continue to Decline as Competition Intensifies

CRISIL Research expects the A2 segment to grow 11-13 per cent in 2010-11 compared with that of 10-12 per cent for the industry as a whole (excluding sales volumes of Tata Nano).

Cost Pressures Increase with the Increase in the Number of Models

While the introduction of several models over the past few years has enabled car manufacturers to increase sales volumes, their costs have increased significantly.

Model Introductions Increase Players' Product Development and Selling Expenses

For instance, selling expenses per unit of sales have increased at 11 per cent CAGR over the past four years up to 2008-09. This indicates car manufacturers are under greater pressure to attract and retain customers in order to maintain market share.

Players will Need to Increase Sales Volumes per Model to Maintain Margins

To maintain their margins, CRISIL Research believes that small car manufacturers would need to increase sales volumes per model rather than introduce more models in the A2 segment, which will diminish the benefits of scale efficiency.

CONCLUSIONConsidering its advantagesthe scale of its domestic small-car industry, low labor costs, and its deep understanding of the emerging-market consumerIndia is in a strong position as it looks to expand further into the export market.. India currently spends more than $40 billion annually to import the oil it needs. So the development of new, more fuel-efficient technologies will help the country reduce its massive trade deficit while making its cars more attractive in other emerging markets. A more robust auto industry will mean an additional 4 million jobs by 2012, furthering the development of its middle class and pulling a significant segment of its population out of poverty. The worldwide small-car market presents a tremendous opportunity for India. But winning that market will require that India act on a variety of fronts to promote its export efforts. And to ensure that it stays ahead of its many able competitors, it must act now.