report internship project

Summer Internship Project Report on sale strategy and Market development plan to improve

Leyland Deere Market share in Delhi/NCR region

7/27/2013

Leyland Deere

Submitted by

Nishchal Sarin

BITS PILANI, MBA

Department of Management

Batch 2012-14

2

Summer Internship Report, MBA 2012-14

CERTIFICATE

This is to certify that Mr. Nishchal Sarin, has completed his summer internship at Leyland

Deere, and has submitted a report on sale strategy and Marketing development plan to improve

Leyland Deere Market share in Delhi/NCR region towards partial fulfilment of the requirement

for the award of Degree in Master of Business Administration from BITS Pilani.

This report is the result of his own work and to the best of knowledge no part of it has earlier

comprised any other report, monograph, dissertation or book. This project was carried out under

supervision of Mr. Sameer Wadhwa, Assistant Vice President- Sales and Marketing.

Date:-

Place: - New Delhi -------------------------------

Sameer Wadhwa

AVP, Marketing & Sales

3


ACKNOWLEDGEMENT

The satiation and euphoria that accompany the successful completion of the project would be incomplete without the mention of the people who made it possible.

I would like to take the opportunity to thank and express my deep sense of gratitude to my corporate mentor Mr. Sameer Wadhwa and Mr. Rajat Mathur. I am greatly indebted to both of them for providing their valuable guidance at all stages of the study, their advice, constructive suggestions, positive and supportive attitude and continuous encouragement, without which it would have not been possible to complete the project. I would also like to thank Mr. Simranjeet Singh ,who in spite of busy schedule has co-operated with me continuously and indeed, his valuable contribution and guidance have been certainly indispensable for my project work.

I am thankful to Mr. T Sasikumar (VP-HR) for giving me the opportunity to work with Leyland Deere and learn.

I owe my wholehearted thanks and appreciation to the entire staff of the company for their cooperation and assistance during the course of my project.

I hope that I can build upon the experience and knowledge that I have gained and make a valuable contribution towards this industry in coming future.

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Table of Content

S No. Topic Page No.

1 Executive Summary 5

2 Introduction Need of the Study Objective of the study

6

3 Organization Background Backhoe Loader Working of Backhoe Loader

7 9 10

4 Literature Review Construction and equipment Industry a) Revenue details of CE companies b) Industry Growth Drivers c) Notable Trends d) Porter’s Five force analysis Product specification

13 18 19 20 21 23 24

5 Competitor Analysis a) Leyland Deere Advantage

25 26

6 Research Methodology 27

7 Data Analysis a) Questionnaire Analysis using IBM SPSS

28 37

8 Conclusion 46

9 Limitations 47

10 MDP and Recommendations 49

11 References 53

12 Annexure Questionnaire Construction site visits

54 58

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EXECUTIVE SUMMARY

The project was started on 27th of May 2013 after knowing all the relevant information related to construction equipment manufacturing industry, under the guidance of Mr. Sameer Wadhwa (AVP Marketing& Sales). The first part of my project involves the study of customer and dealers in Delhi/NCR region, then identification of their problem and helping them in order to increase sale. For this I used the method of personal interviews and questionnaires. At the same time , they were being made aware of various scheme of Leyland Deere for the quality insurance.

To complete my project i visited customer located in Gurgaon, Faridabad, Sonipat and Gautam Buddha Nagar regions for better understanding of their grievances and to identify the gaps in sale process. For this I visited around 30 customers in the area, and spoke to them. I was also supposed to find out new customers and convince them to buy Backhoe loader of Leyland Deere by showing them the opportunity of getting attached with a global brand like Leyland Deere and how its product is superior to other products which are available in the market.

The second part of my internship was the study of consumer attitude towards Leyland Deere in comparison to competitors like JCB, Escorts etc and to find out the factors affecting the decision of purchase of Backhoe loader. For this a sample of 30 consumers was taken as it’s a niche market and customers are less and a factor analysis was carried out to find the decision making factors. After analysing these factors a proposed marketing development plan was formulated.

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INTRODUCTION

Need of study-

The project was an attempt to know the reasons behind low sale of backhoe loaders of Leyland Deere in Delhi/NCR regions. Despite of being a renowned brand i.e. Ashok Leyland and John Deere, the sale picture in Delhi/NCR region is very bleak due to stiff competitors like JCB, Escorts, and CAT etc. There is a need to revamp the company and position it all over again in the mind of the customer.

In doing so firstly Brand has to be positioned competitively in the market, creating more awareness among the potential customers. Secondly a study on customer’s decision making factors is required in order to understand their priorities which can be worked upon. For this purpose a research is to undertaken to find out the market scenario. With the help of the responses given by the consumers and data analysis, the company will be able to understand its strengths, weakness, opportunities and threats. The survey report submitted by me will assist the company to take right decisions to increase the turnover and market share.

Objective of the study –

The objectives of the study are the following:-

1. The main objective of this project is to probe the reasons behind small market share of Leyland Deere and to find out the measures that can be adopted to increase the sales.

2. To study the latest trends in construction industry.

3. To identify the issues related to backhoe loaders.

4. To get the feedback from current customers of our product.

5. To add up new customers.

6. To study Leyland Deere positioning in the mind of the consumers vis-à-vis competitors.

7. To find out the factors that affect customer’s decision to purchase Backhoe loaders.

8. Suggesting viable recommendations to be implemented in the area

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ORGANISATIONAL BACKGROUND

Founded in 1837, Deere & Company, most commonly known by its name, John Deere, is an American corporation based in Moline, Illinois, and one of the largest manufacturers of agricultural machinery in the world. Deere and Company agricultural products, sold under the John Deere name, include tractors, combine harvesters, cotton harvesters, balers, planters/seeders, sprayers, and UTVs. The company is also a manufacturer of construction equipment and forestry equipment, as well as a supplier of diesel engines and drive trains (axles, transmissions, and gearboxes) used in heavy equipment. Additionally, John Deere manufactures equipment used in lawn, grounds, and turf care, such as walk-behind lawn mowers, zero-turn lawn mowers, lawn tractors, and snow throwers. To support the core businesses, John Deere also provides financial services and other related activities. The company's slogan is "Nothing Runs Like a Deere" and has a picture of a leaping deer as a logo.

Ashok Leyland is an Indian automobile manufacturing company based in Chennai, India. Founded in 1948, the company is one of India's leading manufacturers of commercial vehicles, such as trucks and buses, as well as emergency and military vehicles. Operating six plants, Ashok Leyland also makes spare parts and engines for industrial and marine applications. It sells about 60,000 vehicles and about 7,000 engines annually. It is the second largest commercial vehicle company in India in the medium and heavy commercial vehicle (M&HCV) segment with a market share of 32%.

Ashok Leyland, the flagship firm of the Hinduja Group and the US-based John Deere announced their entry into the burgeoning Indian construction equipment business through their 50:50 joint venture, with the launch of their first product, Leyland Deere 435 Backhoe Loader, priced at Rs 23.59 lakhs (Ex-Showroom)

New Brand-

The new brand, Leyland Deere 435 Backhoe symbolises the coming together of two strong partners, each bringing to the association their unique individual strengths and competencies. John Deere brings in their advanced technical knowhow and vast experience in the global construction equipment space, while Ashok Leyland lends in-depth knowledge of the Indian market, proven expertise in manufacturing, sourcing and distribution, to this strategic partnership.

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

http://en.wikipedia.org/wiki/Moline,_Illinois

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

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

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

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

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

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

http://en.wikipedia.org/wiki/Planter_%28farm_implement%29

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

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

http://en.wikipedia.org/wiki/Side_by_Side_%28UTV%29

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

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

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

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

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

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

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

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

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

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Redefining benchmarks-

The first product from this combine, the Leyland Deere 435 Backhoe Loader has been designed to transform the nature of the construction equipment business in the country as well as redefine the way construction equipment products are perceived and used. Exceptionally well engineered and feature-rich, the 435 BHL will deliver superior value to the ever evolving construction equipment customer by addressing the critical considerations of lower operating cost, higher productivity and greater uptime. It is rugged in structure, powered by an Ashok Leyland engine of proven pedigree from the 'H' Series platform and replete with USPs including power shift transmission, best in class cabin with larger space and higher visibility, higher breakout forces and greater dig depths. In order to make sure that patrons get higher uptime, Leyland Deere 435 BHL will be supported by innovative customer care package called the CARE programme which will be delivered through the efficient Leyland Deere channel network developed. The CARE programme will include an extended warranty of a year after the first year of warranty, committed restoration time for the equipment and regular and periodic engineer visits to the customer during warranty period and also an insurance cover of Rs 2 lakhs for the customer's operator.

Plant- The 435 BHL is being manufactured at Leyland Deere's brand new facility at Gummidipoondi, near Chennai. This plant incorporates globally benchmarked manufacturing processes like robotic welding, CNC cutting, state of the art paint shop to ensure the highest standards of product reliability and durability, supported by international standard quality processes and systems.

Management-

Chairman –Mr. V. Sumantran

CEO – Mr. P. Ravishankar

AVP Marketing & Sales - Mr. Sameer Wadhwa

Products-

Leyland Deere

Backhoe Loader 435

Four Wheel Drive Loader

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Backhoe Loader

A backhoe loader, also called a loader backhoe, digger, or colloquially shortened to backhoe, is a heavy equipment vehicle that consists of a tractor fitted with a shovel/bucket on the front and a small backhoe on the back. Due to its (relatively) small size and versatility, backhoe loaders are very common in urban engineering and small construction projects such as building a small house, fixing urban roads, etc. This type of machine is also known as a TLB i.e. Tractor-Loader-Backhoe.

Usage

Backhoe loaders are very common and can be used for a wide variety of tasks: construction, small demolitions, light transportation of building materials, powering building equipment, digging holes/excavation, landscaping, breaking asphalt, and paving roads. Enhanced articulation of attachments can be achieved with intermediate attachments such as the tiltrotator. Many backhoes feature quick coupler (quick-attach) mounting systems and auxiliary hydraulic circuits for simplified attachment mounting, increasing the machine's utilization on the job site. Some loader buckets have a retractable bottom or "clamshell", enabling it to empty its load more quickly and efficiently. Retractable-bottom loader buckets are also often used for grading and scraping. Their relatively small frame and precise control make backhoe-loaders very useful and common in urban engineering projects such as construction and repairs in areas too small for larger equipment. Their versatility and compact size makes them one of the most popular urban construction vehicles. For larger projects, a tracked excavator is generally used. A backhoe loader is an interesting invention because it is actually three pieces of construction equipment combined into one unit. A backhoe loader is:-

A tractor A loader A backhoe

Each piece of equipment is suited to a particular sort of work. On a typical construction site, the backhoe operator usually uses all three components to get the job done.

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

http://en.wikipedia.org/wiki/Loader_%28equipment%29

http://en.wikipedia.org/wiki/Heavy_equipment_%28construction%29

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

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

http://en.wikipedia.org/wiki/Bucket_%28excavator%29

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

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

http://en.wikipedia.org/wiki/Excavation_%28archaeology%29

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

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

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

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

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

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

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

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

http://en.wikipedia.org/w/index.php?title=Versatility&action=edit&redlink=1

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

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

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

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Working of backhoe Loader

The Tractor

The core structure of a backhoe loader is the tractor. Just like the tractors that farmers use in their fields, the backhoe tractor is designed to move easily over all kinds of rough terrain. It has a powerful, turbocharged diesel engine, large, rugged tires and a cab with basic steering controls (a steering wheel, brakes, etc.). Backhoe cabs are either completely enclosed or have an open canopy structure to give the operator protection.

The Loader

The loader is attached in the front and the backhoe is attached in the back. These two components serve very different functions. The loader can do several different things. In many applications, you use it like a big, powerful dustpan or coffee scoop. You usually don't dig with it; you mostly use it to pick up and carry large amounts of loose material. It's also used to smooth things over like a butter knife, or to push dirt like a plow. The operator controls the loader while driving the tractor.

The Backhoe

The backhoe is the main tool of the backhoe loader. It's used to dig up hard, compact material, usually earth, or to lift heavy loads, such as a sewer box. It can lift this material and drop it in a pile to the side of the hole. Basically, the backhoe is a big, extremely powerful version of your arm or finger. It has three segments:-

The Boom The Stick The Bucket

This arrangement is very similar to your arm. Your arm has three segments -- your upper arm, forearm and hand. The backhoe segments are connected by three joints, comparable to your wrist, elbow and shoulder.

http://auto.howstuffworks.com/turbo.htm

http://auto.howstuffworks.com/diesel.htm

http://auto.howstuffworks.com/tire.htm

http://home.howstuffworks.com/home-improvement/plumbing/sewer.htm

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The backhoe moves in pretty much the same way as your arm. This design also provides extra space for the bucket when the operator curls it in with a full load. The backhoe can dig all sorts of holes, but is especially suited for digging ditches. To use the backhoe, the operator has to park the tractor and turn the seat around. The tractor component is for moving the other two components from place to place, and the operator also manoeuvres it when using the loader. The loader and backhoe components are a natural combination for all sorts of jobs. When you dig up a lot of dirt to make a ditch or any other sort of hole, you generally need a loader to either move the dirt out of the area or to fill the dirt back in once you've got the pipes, power lines, etc. in position. The most common application for a backhoe loader is this basic job digging a trench with the backhoe and then back-filling it with the loader.

The Stabilizer Legs

The other appendages you'll typically notice on a backhoe loader are the two stabilizer legs just behind the rear wheels. These legs are crucial to backhoe operation because they take the brunt of the weight when a backhoe is digging. Without the stabilizer legs, the weight of a heavy load or the downward force of digging into the ground would strain the wheels and tires, and the whole tractor would bounce constantly. The stabilizers keep the tractor steady, minimizing the jostling effect of digging with the backhoe. They also secure the tractor so that it won't slip into the ditch or hole.

The stabilizer legs have two types of "shoes," so that they can be planted securely on both dirt and pavement. The grouser shoe side digs into the dirt for a better grip, but would tear up the pavement if you were to use it on a road. For a good grip on asphalt, the operator simply flips the rubber-padded shoe into position.

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CURRENT MARKET SCENARIO

According to Construction World update, it has been projected that the present € 1.6 billion construction equipment industry in India is expected to touch about € 10.3 billion. While the current size is just a fraction of the world market, it has been growing between 10-15 % compared to the global growth of around 5%. The industry has been growing due to the large investments made by the Government and the private sector infrastructure developments. The prospects of the construction equipment industry look attractive with a projected investment of US$ 320 billion for current year. India is one among the top 10 markets for construction equipment and is one of the key international markets. Indian firms are strengthening their existing operations for catering to the growing domestic demand and are also planning to expand to tap overseas markets. At the same time international majors have ambitious plans for India considering that India’s per capita number of machines is very low at 13 machines per million compared to 396 in America and 96 in China.

Evolution of Indian Construction Industry

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Indian Construction Industry

The Indian construction industry, at current prices, contributed more than US$ 91 billion [€ 62 billion] to the country’s gross domestic product (GDP). It employs more than 18 million people. Construction investments accounted for 11 % of GDP and 50 per cent of gross fixed capital formation. Construction activity has grown at 11 % over the period 2006 to 2009. Construction equipment accounts for 5 % - 24 % of construction project costs. Construction equipment accounts for 22 % of road construction costs.

Challenges & Opportunities in construction sector

The major challenge that the construction industry faces during the next five years, is to raise its delivery capabilities with target on sectors such as transportation, housing and urban development. The planned development of infrastructure would face constraints, unless the construction industry improves the delivery potentials by addressing crucial issues and impediments by bringing in systemic changes.

Productivity • R&D in the construction industry should be seen as a continuing activity, because the scientific and technological advancements are needed to strengthen and raise the technological base of the construction industry. Support to the national institutions engaged in scientific research and incentives for private sector players to undertake in-house R&D need to be provided. • Introduction of efficient technologies and modern management techniques to raise the productivity of the industry is vital. • Introduction of new technologies, construction systems, and energy-efficient materials (preferably based on waste recycling) needs to be adequately emphasized in the national strategy.

60%

27%

5%

2% 2%

4%

Sales

Power Generation

Roads

Railways

Telecom

Residential

Civil

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• For R&D sector, there is a need for developing and introducing use of “marginal materials” to enhance the cost effectiveness of works. Adequate funds should be earmarked in the field of R&D for identification of appropriate and alternate materials to reduce the cost of construction. • Management of information in contemporary construction projects is one of the biggest challenges that project teams face in the upgradation of productivity levels. Information technology can be leveraged to address issues related to tendering, bidding, bid evaluation, grading of construction entities, project execution logistics, project management, as well as financial accounting and reporting for the construction industry. Human Resource and Entrepreneurial Development Framework The major impediments faced by the construction industry in raising the levels of productivity are the acute shortage of skilled manpower, both at worker and supervisory levels, as well as the lack of experienced construction engineers. The construction industry, particularly the highway and road construction sectors, is facing acute shortages of contracting agencies. The present situation is marked by lack of a harmonized skill upgradation and certification programme for construction workers and lack of incentives and regulatory framework to prescribe a certain percentage of trained and certified manpower by the contractors.

There is also a need to encourage adequate intake of civil engineers in engineering institutions to mitigate the existing shortage. A National Plan for training and certification of construction personnel at all levels needs to be developed and implemented.

• CIDCO (Construction Industry development Council), in association with several universities and industry constituents, has offered an HRD (Human Resource Development) Programme for the workers from construction industry for last three years. The programme, based on an open learning and distant mode of education, offers 38 trades through 19 centres situated in various parts of the country.

Need to reduce Construction Cost • Efforts are required to streamline procedures and mechanisms within the industry as well as enhance the levels of quality for the sector as a whole. • It is estimated that the total cost of procuring, monitoring, and supervising and other indirect costs of construction projects consists of about 22% of the cost of the asset that is created. Quality and Standards To make the Indian construction industry more competitive, aspects related to enhanced quality in construction products should be accorded attention at all levels. The inadequate quality in construction works emanates from lack of incentives for inducting new technology, lack of pre-qualification requirements for trained and certified workmen, lack of appreciation for lifecycle costing approach, and lack of adequate R&D. In order to enhance the technological capabilities of the industry, all stakeholders would be required to actively support training and certification

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levels for skilled workers, supervisors, and managers, and promote construction techniques (such as ready-mixed concrete, pre-fab techniques) that use information technology. Safety and Related Issues of Construction Workers Workers employed in construction activity are highly vulnerable segments of the labour force particularly because of its unorganized nature. The workers in construction industry are vulnerable to the inherent risk to their life and limbs. Construction activities are also characterized by poor training, temporary relationships between the employer and the employee, uncertain working hours, lack of basic amenities, inadequacy of welfare facilities, and casual approach of employers towards the problems of employees. Others • Enhance capacity building in the construction sector by improving productivity through introduction of efficient technologies and modern management techniques. • Develop a National Plan for human resource development through training and certification of construction personnel.

Equipment Sector

Product consumption constitutes the bulk of the segment with around 56 per cent while the unorganized sector contributes to around 15 per cent. Unorganised players are more prevalent in the relatively less technology intensive material handling, material preparation and concrete equipment segments. The imports market is estimated around € 400 - 450 million. Of these, the earthmoving, excavation and hauling equipment categories command around 25 per cent. Imported used equipments, which include high-end hydraulic mobile cranes, excavators, motor graders, vibratory compactors comprise a negligible 0.4 per cent of the total construction equipment market. The potential exports market for construction equipment from India is projected to be around € 75 million by 2010. Spare parts revenues range anywhere from 20–29 per cent of the total sales for representative companies and are predominant in tunnelling and drilling equipments. Services revenues have been higher for global players at around 11–20 percent in comparison to 2–8 per cent of Indian players.

Construction & Material Equipment Industry

Products 56%

Spare Parts 21%

Unorganised Sector 15%

Services 6%

Exports 2%

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Segmentation

The key segments that constitute the Construction Equipment industry in India are -

There are several ranges of product in each segment –

Earth Moving Equipment

Concrete Equipment

Material Handling Equipment

Material Preparation

Road Construction Equipment

Construction Vehicles

Backhoe-Loaders Excavators Loaders Bulldozers Wheeled Loading Shovels Wheel Loaders Motor Graders

Concrete Breaker Paver Finisher Concrete Batching Plants Concrete Pumps Concrete Mixers Hot mix Plants

Telescopic Handlers Crawler Cranes Mobile Cranes Truck Cranes Forklifts Pick & Carry Cranes Tower Cranes Conveyors

Crushing Plants Jaw Crushers

Compaction Equip Vibratory Rollers Pavers

Dumpers Articulated Haulers

However, only a few segments dominate this industry: Earthmoving Equipments constitute the biggest segment in this sector.

Construction Equipment Industry Structure Earth Moving Equipment 57% Material Handling 13% Tunnelling & Drilling for Mining 12% Road Construction Equipment 7% Concrete Equipment 6% Concrete Preparations 5%

Construction equipment

Earth Moving Equipment

Road Construction Equipment

Material Handling

Equipment

Concrete Equipment

Construction Vehicles

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Earth Moving Equipment - The earthmoving equipment market in India is estimated at about US$ 1.4 billion. The predominant sub-segment in this is excavators, which account for just over half the market. Backhoes account for 26 percent and loaders for another 5 per cent share. The prime driver for earthmoving equipment is mining activities and construction industry. Within these industries, the key demand drivers going forward are likely to be:- Road construction

Urban infrastructure Irrigation

Real estate construction Mining

Backhoe Loader Market - India is the second largest market for backhoe loaders in the world with a market size of approximately € 400 million. Going ahead growth is likely to be at least 11 % CAGR over the next few years. The market for backhoes is spreading eastwards, largely due to the way in which India is industrializing. JCB India is the leader in this segment with a share of over 70 %. Other players include Telcon, L&T, Caterpillar and Terex. While technology plays a key role especially for lowering operating costs by making the machine more fuel efficient, it is not perceived to be as important for backhoes as it is for excavators. With more players and increased competition, price competition may increase. The drivers for this market have been the housing and urban construction. Backhoes are used for all construction applications and hence have a very high utilisation for renters. Backhoes are perhaps the only market in India amongst construction equipment that have reached a stage of maturity and scale where exports could be considered. JCB’s € 40 million backhoe loader factory in India in Ballabgarh, Faridabad, – the largest plant of its kind anywhere in the world enables JCB to produce 100 backhoes a day in India. The JCB

51%

26%

5%

18%

Excavators Backhoes Loaders Others

0%

10%

20%

30%

40%

50%

60%

Earthmoving Equipment Segment

Total Market Size ~ US$ 1.4 billion

Sales

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backhoe remains the first in its field – the number one backhoe loader in India, from India’s number one manufacturer of construction equipment - the number one in the world, with every one in three sold anywhere in the world today coming from a JCB factory. Ashok Leyland John Deere Construction Equipment Private Ltd newly formed JV will commence production from October 2010 and serial production by January 2011 near Chennai. The JV will initially manufacture backhoes and wheel loaders and will market backhoes, wheel loaders and excavators in India and abroad. The range will subsequently be expanded to include a full line of construction equipment.

Revenue of Construction Equipment Companies

Sales for top six listed construction equipment companies in India rose at a CAGR of 14.6

per cent over the last four years (FY08-11)

In FY11, revenues grew by 11.4 per cent

Total sales of the construction equipment industry stood at 54,162 units in FY11

With infrastructure investment set to go up, demand for construction equipment will rise

further

Machine sales are expected to grow 14% in FY12, on the back of a 26% growth previous

year

1276

1922

0

500

1000

1500

2000

2500

FY08 FY09 FY10 FY11

Sales (USD Millions)

Sales (USD

Millions)

Linear

(Sales (USD

Millions))

CAGR-14.6%

32348

61745

0

10000

20000

30000

40000

50000

60000

70000

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

Total No's of Units Sold

Total No's of

Units Sold

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Industry Growth Drivers

1. Infrastructure investments are the main growth drivers of the construction equipment industry.

a. The Planning Commission estimates total infrastructure spending of about USD428 billion during the 11th Five Year Plan (2007-12).

b. The Commission plans to double India’s infrastructure investments to about USD1 trillion for the 12th Plan (2012-17) − raising its share to GDP from 7.8 per cent in FY12E to 10.8 per cent by FY17.

c. According to the World Bank, India is second only to China with respect to the number of PPP projects. Encouragingly, the government is set to continue promoting public private partnership (PPP) models to help achieve its investment targets

2. Mining activity –

a. India is world’s third largest coal producer with about 570 million tonnes produced in 2010, according to Statistical Review of World Energy published by BP.

b. Coal production in India rose at a CAGR of 5.7 per cent to 537 million tonnes during FY07-FY11.

c. Mechanisation of mining operations, a key ingredient behind rising production, has led to increased demand for mining equipment

d. Government expects coal production to increase to 795 million tonnes by FY17.

3. Roadways Construction- a. India has the world’s second largest road network – spanning 4.2 million kilometres.

The Government intends to increase the paved road to total road ratio and build more national highways

b. Hence, roadways in particular are a key focus area of Government policy and investments in the sector will drive demand for road building and construction equipment.

c. The corresponding investment figure during the 11th Five year plan (2007-2012) for roads is USD65.4 billion

d. The NHAI plans to increase road project being awarded from 5,059 kms and 6,491 kms in FY11 and FY12, respectively to 8,800 kms in FY13

4. Growing housing and construction market to further add demand-

a. The burgeoning real estate industry in India gives a fillip to the demand for concrete and building construction equipments.

b. The residential real estate demand is driven by rising population and growing urbanisation.

c. Rising income levels leading to higher demand for luxury projects. d. Growing demand for affordable housing to meet the demand from lower income

groups e. Commercial real estate demand will be driven by growth in IT/ITeS sector and

organised retail f. Increasingly construction is becoming more oriented toward mechanisation to reduce

project time and control costs – leading to higher demand for advanced construction equipments

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Government Policies to Aid the sector

1. Delicensing - The material handling equipment industry is de-licensed and Foreign Direct Investment (FDI) of up to 100 per cent under the automatic route as well as technology collaboration is allowed freely.

2. Policy initiatives related to infrastructure-

Government of India’s focus on infrastructure development is the biggest driver for the construction equipment industry. The Union Budget (2011-12) has allocated USD44.6 billion to the infrastructure sector.

3. Special Economic Zones (SEZs)-

The government has granted sops, including a large number of SEZs, to the capital goods industry of which construction equipment is a part; especially with an impetus to increase exports

4. Tariffs and custom duties –

• The government has removed tariff protection on capital goods • Custom duties on a range of goods that are used in the manufacturing process have

also been lowered • Custom duty exemption on road construction equipments extended to projects

awarded by MDA in the Union Budget of FY13 5. Foreign Direct Investment – 100% permissible

• Greenfield airports • Construction & maintenance of infrastructure like ports, harbours, roads and

highways • Power generation, transmission and distribution and power trading • Mass rapid transport systems • Townships, housing, built-up infrastructure and construction-development projects

Notable trends in the construction equipment industry

1. Increasing imports from China- •Chinese equipment manufacturers have a strong presence in some segments like wheel loaders (market share: 12 per cent), dozers (market share: 13 per cent) •Chinese equipments tend to be price competitive, thereby putting downward pressure on prices of domestic equipment manufacturer

2. Imports of used items-

•The global downturn of 2008-09 resulted in a sharp increase in imports of equipments from idle global capacities, and used and obsolete machines

21


•Imports of used crawler and mobile cranes made up 50-80 per cent of total consumption in that segment during FY08-FY11;

3. Increased R&D-

•Increased presence of international companies/products has forced Indian manufacturers to invest in R&D in order to match international quality standards •Deeper understanding of the market and the requirement to produce India-specific products has further raised the need of increased R&D

Porter’s Five Force Analysis

Degree of Rivalry The amount of direct competition among the firms within industry is a determinant of the competitive state of most industries and their overall profitability. If firms in the industry exhibit a higher degree of rivalry, then make industry profits to be lower level.

Threat of Substitute Threats of Substitution”, where substitute of products and services can limit the potential returns of an industry by placing a ceiling on the prices firms in the industry can profitably charge. Substitute products and services are those products or services that appear to be different but can satisfy the same need as another products or services.

Threat o New Entry Threat of New Entrants” which is decision from new competitors to enter an industry and the desire to gain market share, thus level of profits being earned by existing firms is decreased. The seriousness of the threat of entry will depend on the existence of barriers to entry and the

Internal Rivalry

Price and Service are the differentiators

Lack in product differentiation

Threat of Substitute

Complete subsitution is not

possible

Product enhancement is

possible

22


reaction that entrants can expect from existing competitors. Porter (1980) advocates that higher barriers to entry make lower serious threat of entering for the new entrants. There are some major sources of barriers to entry including economies of scale, product differentiation, capital requirement, and cost advantages independent of size, access to distribution channels, switching costs, and government policy.

Suppliers Power

Suppliers can exert bargaining power on participants in an industry by raising prices or reducing the quality of purchased goods and services. Powerful suppliers can thereby squeeze profitability out of an industry unable to recover cost increases in its own prices.

Bargaining power of buyers

Bargaining Power of Buyers”, where customers affect an industry through their ability to force down prices, bargains for higher-quality or more services, and play competitors off against each other. This power of buyers or customers depends on a number of characteristics of the market situation and on the relative importance of purchases to the industry compared with its overall business.

Suppliers Power

Import of critical components

Inadeqaute Suppliers base to meet demand

Buyers Power

Strong increase in demand

Service senstive market

23


PRODUCT SPECIFICATION

435 BHL Specifications

Overall length 5908 mm

Dump height 2735 mm

Max dig depth 4569 mm

Weight 7775 Kg

Speed

Forward 1st gear 5.3 km

Forward 2nd gear 9.6 km

Forward 3rd gear 19.1 km

Forward 4th gear 33.4 km

Reverse 1st gear 6.6 km

Reverse 2st gear 11.6 km

Service capacity

Hydraulic Oil 38. Lt

Engine Oil 10 Lt

Rear Axle Oil 18 Lt

Transmission Oil 15 Lt

Engine coolant 15 Lt

Diesel 151 Lt

Hydraulics

Pump flow 106 lpm

System relief pressure 250 bar

Tyre

Front 90.00 * 16 – 16PR

Rear Tyre Standard

16.9 *28 -12PR Industrial

Rear Tyre optional 14* 25 - 20 PR HDT

http://www.youtube.com/techtrixinfo





24


COMPETITOR ANALYSIS

Leyland Deere faces stiff competition from various well established competitors in the market shape of backhoe loaders. Current backhoe market is around 38800 loaders across India. Market Leader in this segment is JCB, which dominates more than 73% of total market. The nearest competitor is CASE, whose market share is 10%.

JCB had the advantage of the first movers in the market; they forayed into Indian Market in the year 1969. They have well established customer base. Following pie chart depicts market share of various companies.

Competitor’s Geographical coverage

Companies manufacturing Backhoe Loaders-

JCB- JCB India Limited, Ballabgarh (Haryana), India’s largest manufacturer of construction equipment is a fully owned subsidiary of JC Bamford Excavators Limited, UK. The company offers 21 different machines in seven product types such as Backhoe Loaders, Loading Shovels, Tracked Excavators, Compactors, Telehandlers, Skid Steer Loaders and Pick and Carry Crane.

Leyland Deere -Ashok Leyland, the flagship firm of the Hinduja Group and the US-based John Deere announced their entry into the burgeoning Indian construction equipment business through their 50:50 joint venture, with the launch of their first product, Leyland Deere 435 Backhoe Loader.

Escorts- Escorts Construction Equipment Limited (ECEL) manufacturers and markets construction and material handling equipment like cranes, loaders, vibratory rollers, Backhoe Loader and forklifts. The company introduced the concept of Pick 'n' Carry hydraulic mobile cranes in the 1970s in India

Telcon- Telcon is subsidiary of TATA Motors, which holds 60% share and Hitachi construction machinery Co. Ltd, Japan holding the balance 40%. The company commenced manufacturing equipments in1961, as a division of TELCO. In 1984, it entered into collaboration with HCM, Japan for manufacturing state of the art hydraulic excavators.

73%

1%

10%

2% 3%

2%

4%

4%

Market Share

JCB

ACE

CASE

CAT

ESCOR

TS

Company Office/Branch Dealers Outlets

JCB 20 54 450

TELCON 32 38 110

L&T 20 45 100

http://en.wikipedia.org/wiki/Crane_%28machine%29

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

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

25


L&T Case- It is a 50:50 joint venture between L&T and CNH, global Nv. engaged in the manufacturing and sale of construction equipments and road building equipments such as loaders, backhoes and vibratory compactors.

Terex Vectra - Terex Vectra equipment Limited is 70:30 joint venture of Terex Corporation, USA and Vectra Limited UK. The former is the 3rd largest construction equipment manufacturer in the world, while the latter is engaged in diverse fields such as trucks, buses, automotive parts and construction equipments.

Caterpillar Inc - Caterpillar Inc., is an American corporation which designs, manufactures, markets and sells machinery and engines and sells financial products and insurance to customers via a worldwide dealer network. Caterpillar is the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives.

BHL MARKET TREND

https://en.wikipedia.org/wiki/Heavy_equipment_%28construction%29

https://en.wikipedia.org/wiki/Internal_combustion_engine

https://en.wikipedia.org/wiki/Financial_services

https://en.wikipedia.org/wiki/Dealer_%28franchising%29

26


Leyland Deere Competitive Advantage

Leyland Deere has introduced a superior machine in the market as compared to its competitors.

Specification comparison Leyland Deere vs. JCB-

Specification JCB 3DX(New) Leyland Deere 435 CAT 424B

1. Weight 7460 kg 7775 kg 7960kg 2. Overall Length 5900 mm 5908 mm 5710 mm 3. Height to Top of

Cab 2870 mm 2943 mm 2900 mm

4. Bucket Rotation 185° 190° 205° 5. Engine Oil 15 L 10 L 12 L

6. Side reach to centre line of machine

6020 mm 6434 mm 5637mm

7. Reach-Ground Level to rear wheel center

6720 mm 7262 mm -

8. Below Ground dig depth

70 mm 122 mm -

9. Price 22.25 Lakhs 23.5 Lakhs 20 lakhs 10. Warranty 1 year 2 years 1 year

Performance analysis Leyland Deere vs. JCB Superior At Par Inferior

High -

Product

Uptime

High Product

Reliability

Resale Value

High

Productivity

Differentiating

service & Usage

Experience

Low operating and

maintenance Cost

Channel

Value

addition Low fuel Consumption

27


RESEARCH METHODOLOGY

Purpose- The basic purpose of this research is to find out the factors affecting the decision of the consumer to purchase backhoe loaders. Problem- To find out problem is the first stage of the research process. It represents translating the management problem into research problem. Consumers have faith in the brand Ashok Leyland and John Deere; still its market share is very less as compared to JCB. Objectives- The objectives of the study are as follows: -

1) The objective of the study is to analyse various factors affecting backhoe loader purchase and to find out primary factors with are seen as critical by customer before buying any brand backhoe loader.

2) To find out in which cluster according to customer, Leyland Deere lies in comparison to JCB.

Causal Research- Causal Research explores the effect of one thing on another and more specifically, the effect of one variable on another. The research is used to measure what impact a specific change will have on existing norms and allow market researchers to predict hypothetical scenarios upon which a company can base its business plan. We have used the Causal research to find out the parameters that affecting Backhoe loaders purchase. Survey- Surveys—from in-person to web-based and discrete choice to stated preference—are an important means of collecting sociological, statistical, and demographic data. We have used online surveys and in person surveys to collect data from various profile of customers who buys or rents backhoe loaders. We used the Ratings of the respondents in these Online Surveys to analyze different brands of backhoe loaders available in market. Sampling Frame- A Sampling frame consists of a list of item from which the sample is to be drawn. The sample frame for this research constitutes the customers, who are Corporates, Contractors and retailers. Sample Size- The sample size of the research was 30 individuals.

Location- Delhi/NCR, Specifically Faridabad and Ghaziabad regions.

28


Data Analysis from Questionnaire

Profile of survey respondents: - Survey respondent are divided into three categories, which are corporate clients, contractors and local retailers.

There were in total 30 respondents. There distribution is depicted by following graph.

Backhoe Loaders owned or rented by all the respondents. According to answers given by the clients following charts is arrived upon. In which maximum number of backhoe loaders that is owned/rented by a client came out to be 9. Median value is 3 and Min value is 1

13

7

10

0

2

4

6

8

10

12

14

Corporate Contractors Retailers

Respondents

Respondents

9

7 7 7

6 6

4 4 4 4 4 4

3 3 3 3 3 3

2 2 2 2 2 2 2

1 1

0

1

2

3

4

5

6

7

8

9

10

27 24 25 26 22 23 18 17 16 21 20 19 12 11 10 15 14 13 5 4 3 6 9 8 7 1 2

No's of Loaders

29


Customer buying preference related to various companies is depicted in the following bar chart diagram- According to customer preference maximum numbers of the customers are in favour of buying JCB backhoe loader. Survey results shows that around 89% of the customers have given JCB full rating.

Company Name/

Rating 1 2 3 4 5

JCB: 0(0%) 0(0%) 1(3.7%) 2(7.41%) 24(88.89%) ACE: 4(15.38%) 13(50%) 5(19.23%) 3(11.54%) 1(3.85%) Escorts 0(0%) 2(7.41%) 7(25.93%) 12(44.44%) 6(22.22%) Leyland Deere 6(22.22%) 10(37.04%) 5(18.52%) 2(7.41%) 4(14.81%) CAT: 1(3.7%) 10(37.04%) 11(40.74%) 5(18.52%) 0(0%) Mahindra 2(7.41%) 8(29.63%) 13(48.15%) 4(14.81%) 0(0%) L&T - Komastu 7(25.93%) 15(55.56%) 2(7.41%) 2(7.41%) 1(3.7%) Terex 4(15.38%) 17(65.38%) 4(15.38%) 0(0%) 1(3.85%)

0

4

6

1 2

7

4

0

13

2

10 10

8

15

17

1

5

7

5

11 13

2

4

2

3

12

2

5 4

2

24

1

6

4

1 1

0

5

10

15

20

25

30

1

2

3

4

5

CUSTOMERWISE BRAND RATING

30


Usage Backhoe loader-

Backhoe loader can be employed for many functions like digging, loading, breaking etc. According to usage by customer, we arrived at following results. Digging is the primary function that is used; all the respondents have opted for this purpose.

Functions / Usage Always Sometimes Never Total Respondents

Digging 27(100%) 0(0%) 0(0%) 27

Loading 23(85.19%) 4(14.81%) 0(0%) 27

Paving Roads 2(7.41%) 13(48.15%) 12(44.44%) 27

Excavation 3(11.54%) 17(65.38%) 6(23.08%) 26

Rock Breaking 12(41.94%) 9(29.03%) 9(29.03%) 30

Light material Transportation 4(15.38%) 20(76.92%) 2(7.69%) 26

27 23

2

3

13

4

0

4

13

17

9

20

0 0

12

6

9

2

0

5

10

15

20

25

30

Always

Sometimes

Never

31


Buy or Rent Decision – When it comes to buying or renting, we came to know that around 71% of customers prefer to buy backhoe loaders for their operations.

As rental cost of backhoe loader varies from Rs70000/- to 80000/- per months. Customer prefers to buy the machine. Most of the corporate customers take loaders on rent eg ITD, Simplex Infrastructure etc because of the fact that they require 3 to 6 loaders for their daily operation, buying all six loaders will add to their operating cost as price of each loader is around 24 lacs.

Customer profile according to years into construction business- Most of the client that i visited are into business more than 5 years. Around 74% of clients are in the business over 5 years.

20

9

Buying Decision

Buy

Rent

1

8

10 10

0

2

4

6

8

10

12

0-3 yrs 3-5 yrs 5-10 yrs More than 10

yrs

Customer profile

0-3 yrs

3-5 yrs

5-10 yrs

More than 10 yrs

32


Factors influencing customer Buying decision- Initially during my client visits, my main motive was to find out which all the factors that influencing customer buying decision. I came to know after lot of customer visit that price is not a primary factor in decision making. I jotted down all the factors that affect customer decision in choosing a particular brand over other. In my survey i took 13 factors which following result table depict. On a likert scale, i asked customers to rate the factors on a scale from one to five. One means least affecting their decision and five means most affection their decision.

Factors/ Customer Rating 1 2 3 4 5

PRICE: 0(0%) 0(0%) 6(22.22%) 9(33.33%) 12(44.44%)

AVAILABILITY OF

SPARE PARTS: 0(0%) 0(0%) 0(0%) 6(22.22%) 21(77.78%)

TECHNOLOGY

INVOLVED: 0(0%) 1(4%) 20(80%) 2(8%) 2(8%)

MAINTENANCE COST: 0(0%) 0(0%) 0(0%) 8(29.63%) 19(70.37%)

REPUTATION OF

COMPANY: 0(0%) 0(0%) 7(26.92%) 7(26.92%) 12(46.15%)

QUALITY: 0(0%) 0(0%) 4(14.81%) 19(70.37%) 4(14.81%)

ENGINE

SPECIFICATION: 0(0%) 7(25.93%) 17(62.96%) 3(11.11%) 0(0%)

LOADING CAPACITY: 0(0%) 6(22.22%) 13(48.15%) 8(29.63%) 0(0%)

MACHINE BODY

MATERIAL: 0(0%) 7(25.93%) 18(66.67%) 2(7.41%) 0(0%)

SERVICE LIFE: 0(0%) 0(0%) 0(0%) 15(55.56%) 12(44.44%)

AFTER SALES SERVICE: 1(3.7%) 9(33.33%) 2(7.41%) 11(40.74%) 4(14.81%)

ORDER DELIVERY TIME: 0(0%) 0(0%) 13(50%) 13(50%) 0(0%)

RECOMMENDATION

FROM KNOWN 0(0%) 2(7.69%) 14(53.85%) 10(38.46%) 0(0%)

33


Analysis from factor table –

Availability of spare parts (77.8%) and Maintenance cost (70%) are the primary factors that influence customer buying decision. Even recommendation from known associate has 38.46% impact on customer buying. Only 44% of customers are majorly concerned with the price as primary parameter.

Reputation of the company also has huge impact on the customer who is new to customer industry. Around 46% of the customer goes for a well known brand in the market. Factor that least affect the buying behaviour of customer are technology involved and engines specification of the loader. It is because most of the customer especially corporate use rented machines and their decision to rent majorly depends on rental per month and customer who buys the machine mostly uneducated and they are least concerned with the technology, they buy the machine to give it on rent. They are mostly concerned about the machine running cost and its operations in various working conditions.

6

0

20

0

7

4

17

13

18

0

2

13 12

9

6

2

8 7

19

3

8

2

16

11

13

10

12

21

2

19

12

4

0 0 0

12

4

0 0 0

5

10

15

20

25

1

2

3

4

5

Respondents Ratings

34


Before buying, around 33.3% of customer made comparison with other brand product available in the market as shown by following figure.

Most of the customer didn’t made comparison around 66.7% with other brands available in the market because they prefer to go of the same brand backhoe loader again.

Demo of product – Demo of the product is offered only by Leyland Deere in the market. No other company prefer giving demo to customer before purchase as it increases the cost to company. As shown by the following figure only 29% of the customer respondents were offered demo of the machine by any of the company executive during their sale except Leyland Deere which has offered demo to more than 70% of its customers.

18

9

0

2

4

6

8

10

12

14

16

18

20

NO YES

Comparison

Respondents

9

19

0

2

4

6

8

10

12

14

16

18

20

Yes No

Demo Offered

Demo Offered

35


Demo plays a critical role in buying decision- 75% of respondent feel that demo is helpful in making a purchase as customer gets to see the machine operation in actual working conditions. He can identify its pros and cons.

Leyland Deere Customer Satisfaction- Most of the customers are very satisfied with Leyland Deere product as compared to their earlier brands loaders.

21

8

0

5

10

15

20

25

Yes NO

Demo Helps in purchase

Demo Helps in purchase

1

5

1 0 0

20

0

5

10

15

20

25

Respondents

36


In the survey, out of 30 there were 8 Leyland Deere customers. In which only one customer was market not applicable as he bought the machine a month back only and he wants to run the machine for at least 1000hrs before commenting on the satisfaction. So out of 8 customers, 6 are very satisfied with their purchase. This can be concluded, that Leyland Deere has more than 75% of customer satisfaction.

Order Delivery – 68% of the customer aspect delivery of the loader from 4 to 10 days time period.

Customer Loyalty - Most of the customer wants to purchase same company backhoe loader again. During the survey it was found that around 89% of customer will go for that same brand machine again. Six of the Leyland Deere customers are willing to buy the machine again which is 75% of their total customers. There were two customers, one had a different requirement, he wants a higher BHP machine and other found the price was the machine bit too high. Rest all are very much satisfied with machine and they are willing to buy again when there is requirement.

1

19

8

Order Delivery Period

1-3 Days

4-10 Days

11-15 Days

25

3

0

5

10

15

20

25

30

Yes No

Total Respondents

Buy Again

6

2

0

1

2

3

4

5

6

7

Yes No

Leyland Deere

Respondents

Buy Again

37


If someone of client known associate wants to purchase a backhoe loader, 72% of the customer will give positive recommendation to them to buy their brand and 25% of customer won’t give any recommendation as they think it depends upon the person to take recommendation or not as shown in following figure.

SPSS Analysis

Before formulating any marketing strategy, i did cluster analysis on the data provided by the respondent’s related to their buying preference according to various brands of backhoe loaders available in the market. So, that i can understand Leyland Deere forms cluster with which other company backhoe loader.

Cluster Analysis- It is a class of technique used to classify objects or cases into relatively homogenous groups called clusters. Objects in each cluster tend to be similar to each other and dissimilar to objects in the other cluster.

Importance of cluster analysis-

1. Understanding buyer behaviour 2. Segmenting the market 3. Selecting test market 4. Reducing data

In marketing cluster analysis- Help marketers discover distinct groups in their customer bases, and then use this knowledge to develop targeted marketing programs

20

1

7

1

0

5

10

15

20

25

Respondents

Respondents

38


Factor analysis- Factor analysis is used to find factors among observed variables. If data contains many variables, you can use factor analysis to reduce the number of variables. Factor analysis groups variables with similar characteristics together. With factor analysis you can produce a small number of factors from a large number of variables which is capable of explaining the observed variance in the larger number of variables. The reduced factors can also be used for further analysis. Advantages-

1. Reduction of number of variables, by combining two or more variables into a single factor

2. Identification of groups of inter-related variables, to see how they are related to each other

SPSS Cluster Analysis Result-

Case Processing Summary

Cases

Valid Missing Total

N Percent N Percent N Percent

8 100.0 0 .0 8 100.0

Average Linkage (Between Groups)

Agglomeration Schedule

Stage Cluster Combined Coefficients Stage Cluster First Appears Next Stage

Cluster 1 Cluster 2 Cluster 1 Cluster 2

1 5 6 4.583 0 0 2

2 5 8 5.500 1 0 3

3 2 5 5.888 0 2 4

4 2 7 6.415 3 0 6

5 1 3 6.928 0 0 7

6 2 4 7.836 4 0 7

7 1 2 11.820 5 6 0

39


Icicle Plot-It is a visual representation of the agglomeration schedule. It is read from the bottom to top.

Dendrogram-

40


Analysis from Dendrogram-

A dendrogram is a branching diagram that represents the relationships of similarity among a group of entities. We read the Dendrogram from left to right. Vertical lines are objects and clusters joined together – their position indicates the distance at which this merger takes place. Case-1 JCB Case 2-ACE

Case 3-Escorts Case-4 Leyland-Deere

Case-5 CAT Case -6 Mahindra

Case -7 L&T –Komastu Case- 8 Terex

Level 1 5-6 Level 2 8-(5-6) Level 3 2-(8-(5-6)) Level 4 7-2-(8-(5-6)) Level 5 1-3 Level 6 4-(7-(2-(8-(5-6)))) Level 7 1-4-(7-(2-(8-(5-6))))

From Icicle plot, at 7 CAT and Mahindra form one cluster. At 6 Terex joins CAT and Mahindra cluster. At 5 Ace joins with Terex, CAT and Mahindra to form a cluster. At 4 L&T-Komastu joins Ace, Terex, CAT and Mahindra to form on cluster. At 3, JCB and Escorts form a cluster. At 2, Leyland Deere joins the cluster formed by ACE, Terex, L&T, CAT and Mahindra. At 1, all companies to form one cluster.

As per the dendrogram analysis, we can see that Leyland Deere is at far of proximity from market leader JCB. It is close to CAT and L&T when it comes to customer buying preference. JCB and Escorts form a separate cluster which is at far of proximity from Leyland Deere. So, Leyland Deere should opt for more market penetration strategy to get it close to JCB and escorts when it comes to customer buying preference.

Factor Analysis –

Before formulating any marketing strategy, i did factor analysis on the data provided by the respondent’s related various factors that influence their buying decision. I took 13 factors into account for running factor analysis in accordance to various brands of backhoe loaders available in the market.

Factor analysis- Factor analysis is used to find factors among observed variables. If data contains many variables, you can use factor analysis to reduce the number of variables. Factor analysis groups variables with similar characteristics together. With factor analysis you can

41


produce a small number of factors from a large number of variables which is capable of explaining the observed variance in the larger number of variables. The reduced factors can also be used for further analysis. Three stages in factor analysis-

1. First, a correlation matrix is generated for all the variables. A correlation matrix is a rectangular array of the correlation coefficients of the variables with each other. 2. Second, factors are extracted from the correlation matrix based on the correlation coefficients of the variables. 3. Third, the factors are rotated in order to maximize the relationship between the variables and some of the factors. Descriptive Statistics- The first output from the analysis is a table of descriptive statistics for all the variables under investigation. Typically, the mean, standard deviation and number of respondents (N) who participated in the survey are given. Looking at the mean, one can conclude that spare parts availability is the most important variable that influences customers to buy the product. It has the highest mean of 4.77.

Descriptive Statistics

Variables Mean Std. Deviation Analysis N

Price 4.2222 .80064 27

Spare Parts 4.7778 .42366 27

Technology 3.1481 .66238 27

maintenance 4.7037 .46532 27

reputation 4.1852 .83376 27

quality 4.0000 .55470 27

Engine specs 2.8519 .60152 27

Loading capacity 3.0741 .72991 27

body 2.8148 .55726 27

Service life 4.4444 .50637 27

After sales 3.2963 1.20304 27

Order delivery 3.4815 .50918 27

recommendation 3.2963 .60858 27

42


The Correlation matrix- The next output from the analysis is the correlation coefficient. A correlation matrix is simply a rectangular array of numbers which gives the correlation coefficients between a single variable and every other variable in the investigation. The correlation coefficient between a variable and itself is always 1; hence the principal diagonal of the correlation matrix contains 1s. The correlation coefficients above and below the principal diagonal are the same. The determinant of the correlation matrix is shown at the foot of the table below.

Correlation Matrix

Kaiser-Meyer-Olkin (KMO) and Bartlett's Test- It is use measure the strength of the relationship among variables.

KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .514

Bartlett's Test of Sphericity

Approx. Chi-Square 100.682

df 78

Sig. .043

Communalities- The next item from the output is a table of communalities which shows how much of the variance in the variables has been accounted for by the extracted factors. For instance over 86% of the variance in loading capacity is accounted for while 73.7% of the variance in spare parts is accounted for.

43


Initial Extraction

Price 1.000 .805

SPAREPARTS 1.000 .737

Technology 1.000 .815

maintenance 1.000 .752

reputation 1.000 .443

quality 1.000 .784

Engine specs 1.000 .722

Loading capacity 1.000 .864

body 1.000 .651

Service life 1.000 .545

After sales 1.000 .738

Order delivery 1.000 .701

recommendation 1.000 .661

Total Variance Explained- The next item shows all the factors extractable from the analysis along with their Eigen values, the percent of variance attributable to each factor, and the cumulative variance of the factor and the previous factors. Notice that the first factor accounts for 22.58% of the variance, the second 15.130% and the third 12.562%.

Total Variance Explained

Component Initial Eigen values Extraction Sums of

Squared Loadings

Rotation Sums of Squared

Loadings

Total % of

Variance

Cumulati

ve %

Total % of

Varianc

e

Cumula

tive %

Total % of

Variance

Cumulative

%

1 2.936 22.582 22.582 2.936 22.582 22.582 2.347 18.058 18.058

2 1.967 15.130 37.712 1.967 15.130 37.712 1.945 14.962 33.020

3 1.633 12.562 50.274 1.633 12.562 50.274 1.768 13.596 46.616

4 1.478 11.366 61.640 1.478 11.366 61.640 1.697 13.052 59.668

5 1.205 9.268 70.908 1.205 9.268 70.908 1.461 11.240 70.908

6 .918 7.060 77.968

7 .800 6.156 84.124

8 .596 4.585 88.709

9 .475 3.654 92.363

10 .439 3.378 95.741

11 .267 2.054 97.795

12 .176 1.356 99.151

13 .110 .849 100.000

44


Scree Plot- The scree plot is a graph of the Eigen values against all the factors. The graph is useful for determining how many factors to retain. The point of interest is where the curve starts to flatten. It can be seen that the curve begins to flatten between factors 5 and 6. Note also that factor 6 has an Eigen value of less than 1, so only five factors have been retained. It can be seen that the line is almost flat, meaning the each successive factor is accounting for smaller and smaller amounts of the total variance.

Component (Factor) Matrix- The table below shows the loadings of the eight variables on the three factors extracted. The higher the absolute value of the loading, the more the factor contributes to the variable. The gap on the table represent loadings that are less than 0.5, this makes reading the table easier we suppressed all loadings less than 0.5.

Component Matrix

Component

1 2 3 4 5

Price -.680

SPAREPARTS .738

Technology .785

maintenance .734

reputation

quality .590 -.571

Engine specs -.632

Loading capacity .815

body .534

45


Service life -.557

After sales -.619

Order delivery .603 .553

recommendation .617

Rotated Component (Factor) Matrix- The idea of rotation is to reduce the number factors on which the variables under investigation have high loadings. Rotation does not actually change anything but makes the interpretation of the analysis easier. Looking at the table below, we can see that price and technology are substantially loaded on Factor (Component) 3 while spare parts, loading capacity, after sale service and order delivery are substantially loaded on Factor 1. On factor 2, maintenance, machine body and recommendation are loaded similarly we can say for component loaded on 4 and 5 factors.

Rotated Component Matrix

Component

1 2 3 4 5

Price -.886

SPAREPARTS .796

Technology .778

maintenance .583 -.503

reputation -.511

quality .799

Engine specs .823

Loading capacity -.629 .543

body .695

Service life .582

After sales -.629

Order delivery .713

recommendation .770

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.

a. Rotation converged in 23 iterations.

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CONCLUSION

The Indian construction equipment industry is a key segment of the manufacturing sector and is poised for excellent growth in the coming years, based on India’s overall manufacturing sector and infrastructure growth. The overall industry has been growing at 30 per cent CAGR and is projected to grow at 15 to 20 per cent over the next few years. Earthmoving equipment, material handling equipment and road construction equipment are key segments expected to contribute to the bulk of the growth, driven by construction activity in the parent sectors. This project was about the backhoe loader 435 manufactured by Leyland Deere which due to intense competition from its competitors has relatively small market share in Delhi/NCR region. So in this project different parameters on which the sale of Backhoe loaders depends are studied and analysed from the corporate, retailer and contractor perspective. Finally it was found that Price, Availability of spare parts, Maintenance cost, recommendation from known associate, and Service are the primary factor impacting customer purchase decision. Construction equipment market is a totally unpredictable market and the organisation should be over-cautious of any complaints from customer side. So the company should take every step possible to contain these problems which in some way or the other affects sales.

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LIMITATIONS The limitations of the project is as follows – 1. The study was conducted in Delhi/NCR regions only, so the limited area of the study may affect the conclusions

2. Some of the respondents could not give their proper response due to lack of time. They at times tend to get biased and project a rosy picture which may affect the reliability and relevance of the study

3. It might also be so that some respondents were not motivated enough to respond properly although full attempt was made to keep it as unbiased as possible.

4. There was no provision of visiting cards for the summer trainees which hinder communication at times

5. The duration of the project was short, so the scope of more in-depth evaluation was not possible 6. Some of the respondents didn’t give exact answers related to some questions because they didn’t want to reveal thinks to a stranger. Especially this happened when they were asked about the number of backhoe loaders they owned. 7. In online survey, questions were not made mandatory to answer, because of which few questions got no response.

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Market Development Plan Construction equipment industry is growth at good pace. Market is divided into three profile of customer namely:-

1. Corporate 2. Contractors

3. Retailers Current Position of the company can be seen using following BCG Matrix

Question Marks / Problem Child (Low Market Share / High Market Growth) Question marks are the products that grow rapidly and as a result consume large amounts of cash, but because they have low market shares they don’t generate much cash. The result is large net cash consumption. A question mark has the potential to gain market share and become a star, and eventually a cash cow when the market growth slows. If it doesn’t become a market leader it will become a dog when market growth declines. Question marks need to be examined carefully to determine if they are worth the investment required to grow market share. Leyland Deere follows into the category of question marks because it low share but market growth is high. Dogs (Low Market Share / Low Market Growth) Dogs have a low market share and a low growth rate and neither generates nor consumes a large amount of cash. However, dogs are a cash trap because of the money is being tied up in a business that has little potential. Such businesses are candidate for divestiture. Stars (High Market Share / High Market Growth) A Star is being able to generate huge sum of cash because of their strong relative market share, but simultaneously it also consumes large amounts of cash because of their high growth rate. So

H

I

G

H

L

O

W

LOW HIGH M

arket Grow

th

Market Share

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the cash being spent and brought in approximately nets out. If a star can maintain its large market share it will become a cash cow when the market growth rate declines. Cash Cows (High Market Share / Low Market Growth) As leaders in a mature market, a cash cow demonstrates a return on assets that is greater than the market growth rate – so they generate more cash than they consume. These units should be ‘milked’ extracting the profits and investing as modest as possible. Marketing Mix The marketing mix is a business tool used in marketing and by marketing professionals. The marketing mix is often crucial when determining a product or brand's offering, and is often synonymous with the 4Ps: price, product, promotion, and place; in service marketing.

Product- Leyland Deere has came up with a technically advance product in the construction equipment industry. Product Life Cycle- Life of the product is more than 5 years. It is a differentiated product from competitors in many ways like loader digging depth; low maintenance cost and has better transmission system with automated gears. Price Leyland Deere offers a premium product in the market at a competitive price of 23.5 lakhs. Price elasticity of demand, when it comes to purchase decision is less than 1 as product is prized according to market leader JCB, which sells its 3DX model at 22.5 lakhs. Only retail customers who give the machine on rent are price sensitive. Place / Distribution Network TVS & Sons and The Sachdev Group are the authorized dealers of backhoe loader 435. To ensure that our customers get the best uptime in the industry, the Leyland Deere 435 BHL is supported by an innovative customer care package called the C.A.R.E. Program which is being delivered through the highly efficient Leyland Deere channel network that is rapidly growing across the country. The C.A.R.E. Program includes an extended warranty of a year after the 1st year of warranty, industry-best restoration time for the equipment, periodic engineer visits to the

https://en.wikipedia.org/wiki/Marketing

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customer during the warranty period and also an insurance cover of Rs.2 lakhs for the customer's operator. Faridabad dealer office handles inventory for backhoe loader max 2 in number. If customer places an order, backhoe loader is shipped from Chennai manufacturing plant to the customer location my trains. It takes max 10 days for the consignment to reach customer. Promotion Promotion is most done via work of mouth of customers. As company is new, there representatives are showcasing the machine in construction fairs. Regular construction sites visits are carried out by marketing and sale team representatives to find potential clients. Customer characteristics

Corporate Customers Contractors Retail Customers

• Uses BHL mainly as a utility machine • Maintains the machine well. • Does proper service planning. • Has well organized work shop. • Has service Technicians appointed for maintenance. • Stocks Genuine parts. • Buys lubes in barrels. • Will prefer to have same brand of lubes across his fleet of equipments. • Will closely adhere to service recommendations given by OEM.

• Mainly are sub contractors to a Large contractor/corporate. • Has larger fleet of vehicle •Largely does proper service planning.

• For parts like tooth points, etc., will go for open market parts. • Large fleet owners stock parts & lubes. • Small fleet owners stock only for 1000 hrs parts. • For service are largely dependent on OEM.

• Is dependent on hourly Rental. • Is sensitive to fuel Consumption. • Most of them Resell in 3 ‐ 5 years & goes for new. • His end customer has no brand preference. • No proper Service Planning. • Largely depends on open market for parts. • After Warranty, largely depends on local mechanics. • Doesn’t Stock Parts. • Lubes are mostly procured from open market. • Doesn’t give any training to his operator for machine maintenance. • Helper does the daily maintenance – greasing.

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Suggestions Retail Customer

1. They are more concerned about the price factor as compared to any of implementation cost because of the fact they generally give the machines on rent, which act a primary source of income for them. So to maximize their return they want a good machine at low cost. As we are following perceived value pricing method for our backhoe loaders.

Perceived value is made up of several elements, such as quality, customer support and other attributes like company esteem and brand image.

a) To attract more retail customer first, we should given them an option to

trailer the package that we are offering with our backhoe loader like extra warranty. Which is adds up to cost of machine, they should be given an option to take extra warranty or not depending upon their need.

b) Most of these retail customers are uneducated and are attracted mostly

via word of mouth from their known associates. To create brand awareness among them, regular advertising in local newspaper especially Hindi newspaper should be given.

2. Second most impacting factor was spare parts availability and there price in comparison

to other companies spare parts. Pricing of spare parts should be competitive based pricing, selling at same price as of the competitors. As mentioned by some customers there should not be a great difference between the original spare parts price and locally available spare parts.

a) Spare parts should be ready available as they are in case of JCB and Escorts.

b) Some of spare parts accessories should be given to the customer after purchase.

3. Road side hording are very helpful in spreading awareness about the product in the

market. These hording should be placed nearby construction sites likewise in greater Noida ex, metro sites, rohini and Noida where construction activities are going on full swing.

Corporate Customer

1. Buying decision is mainly dependent on service and spare parts availability. 2. They are less sensitive to price. To create more brand awareness among corporate customers following are recommended-

a) Leyland Deere website is not yet up, so it is very difficult to find any information about the product on internet. Firstly Leyland Deere website should be created mentioning company profile, product offered, and product specification and dealer locations. A specific link should be mentioned on the Ashok Leyland and John Deere websites that directs to Leyland Deere website link.

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b) Social media marketing should be used for generating awareness. Like putting up information on heavy equipment forums, Facebook pages.

c) Company should showcase its product in construction fairs like Excon 2013, BC India 2014.

d) As corporate clients are more inclined towards service and spare parts availability, company should offer different service packages to clients like annual maintenance, add on warranty etc.

e) Company should tie up with various nationalized public and private banks to provide finance schemes to customer at lower interest rates.

f) Company should publish ads in leading newspapers like HT and Times to target more customers.

g) Company should provide customer support hotline service like Telcon.

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REFERENCES http://www.ashokleyland.com/joint-ventures

http://www.deere.com/en_IN/

http://www.ibef.org/

http://www.i-cema.in/industry-updates.html

http://www.jcbindia.com/

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

http://www.thehindubusinessline.com/companies/leyland-deere-developing-wheel-

loader-for-coal-rail-applications/article2790212.ece

http://leo.koppel.ca/backhoe/moving.html

http://www.ashokleyland.com/joint-ventures

http://www.deere.com/en_IN/

http://www.ibef.org/

http://www.i-cema.in/industry-updates.html

http://www.jcbindia.com/

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

http://www.thehindubusinessline.com/companies/leyland-deere-developing-wheel-loader-for-coal-rail-applications/article2790212.ece

http://www.thehindubusinessline.com/companies/leyland-deere-developing-wheel-loader-for-coal-rail-applications/article2790212.ece

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ANNEXURE

Questionnaire

1) Customer Name:-

Address

City

Contact No’s

2) In which operation category you belong: -

Corporate Contractor Retailer

3) Number of Backhoe of loader you have?

4) Kindly Rate the following brands according to your buying preference? (5 - Being the most preferred, 1- Being the least preferred)

Rating / Company

1 2 3 4 5

JCB ACE ESCORTS LEYLAND DEERE

CAT

MAHINDRA

L&T

TEREX

5) For how many years you are using Backhoe Loaders?

0-3 3-5 5-10 More than 10

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6) According to your usage of backhoe loader, Tick the following features?

Always Sometime Never

a) Dumping

b) Loading

c) Paving Roads

d) Excavation

e) Rock breaking

f) Light material transportation

7) Tick the following according, to your buying preference?

Rent Buy

8) On a scale of five, rate the following factors according to their impact on your buying decision? (5- Being the highest impact, 1- Being lowest impact)

1 2 3 4 5

a) Price

b) Availability of spare parts

c) Technology wise

d) Maintenance Cost

e) Reputation of company

f) Quality

g) Engine specification

h) Loading capacity

i) Body material

j) Service life

k) After sales service

l) Order Delivery Time

m) Recommendation from Known

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9) Before buying or renting the machine, did you made any comparison with other brands available in the market? If yes kindly specify.

No

Yes (please specify)

10) Before Buying, did any company executives offered a product demo? Kindly Specify

Yes (please specify)

NO

11) Did you asked for a product demo?

Yes No

12) According to you, demo should be given before purchase?

Yes No

13) Are you using Leyland Deere Backhoe loader?

Yes No

14) As compared to your previous product, how satisfied are you with Leyland- Deere product?

o EXTREMELY SATISFIED VERY SATISFIED o NEUTRAL NOT SATISFIED o EXTREMELY DISSATISFIED NOT APPLICABLE

15) In how days you expect product delivery after purchase?

1-3 days 4-7 days 8-11 days 11-15 days

16) How was your purchase experience with Leyland Deere?

o VERY GOOD o GOOD o AVERAGE o BELOW AVERAGE o NOT APPLICABLE

17) If you want to purchase another backhoe loader, would you like to go for the same company again? If No kindly specify

o YES o NO (please specify)

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18) If a known associate of your wants to purchase a backhoe loader you would-

Convince Him buy same brand as of yours Recommended him to buy other brand

Won’t Recommend Negative recommendation

19) What extra features you want to be included in Backhoe loaders? Comment

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SITE VISITS

CRPF VIKAS PURI

Name of the Construction Company: - Simplex Infrastructure Ltd

Name of the Person Meet: - Ravinder Sharma (Sr. Civil Engineer)

Mohan (BHL operator)

Question Response

1. Number of Loader in use? SIX Two on rental

Four company owned

2. Loader of which companies employed? 2 JCB and 4 ACE

3. Loaders are on Rent or company owned? Rental per month Rs 80,000/-

4. Dealer who supplied the loaders to Simplex Infrastructure Ltd?

Local Retailer name :- Sagar (8923595577 )

5. Why not they have taken others companies loader into account for this construction?

Low operating cost

Less breakdown in machine

6. Number of breakdown they have faced on Loaders?

Hardly any in JCB 3DX because all are new machine less than one year old.

In ACE Once in 3 months in filter

7. Time taken to fix up the repair? 5-7hrs for general fault

8. What is the running or maintenance cost 3.5L of diesel per hr.

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per month?

9. Have you every use Leyland Deere BHL? No

10. Given a chance, will you be willing to buy Leyland Deere loader, with add on features like high operating efficiency, low maintenance cost and extended warranty as compared JCB or ACE?

Yes if service and operation are upto mark as compared to JCB 3DX model.

Analysis

Companies executive are not aware of the Leyland Deere product. They know about Ashok Leyland brand. So again, lack of awareness was found. Price was a major concern before renting a BHL.

Sagar a local retailer has three loader machines; he rent them for 80000/- per month.

Site - PEERA GARHI

Name of the Construction Company: - HCC Ltd

Hindustan Construction Company (HCC) is headquartered in Mumbai, India. HCC's businesses span the sectors of Engineering & Construction, Real Estate, Infrastructure, Urban development & Management.

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Name of the Person Meet: - Lokesh (BHL Loader operator)

Question Response

1. Number of Loader in use? Three

2. Loader of which companies employed? JCB

3. Loaders are on Rent or company owned? Rental 75000/- per month.

4. Dealer who supplied the loaders to HCC construction company?

LEO earthmovers.

5. Why not they have taken others companies loader into account for this construction?

NA

6. Number of breakdown they have faced on Loaders?

2-3 in every 3 months

JCB 3DX is 2006 model.

7. Time taken to fix up the repair? 3-4 hrs

8. What is the running or maintenance cost per month?

4 L of diesel per hr.

9. Have you every use Leyland Deere BHL? No

report internship project

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