A STUDY ON THE IMPACT OF ADVERTISEMENTS, REFERENCE GROUP AND BRAND PERCEPTION IN THE PURCHASE INVOLVEMENT OF CUSTOMERS IN CHENNAI WITH

REGARD TO TVS TYRES.

ORGANIZATION STUDY Submitted to MAHATMA GANDHI UNIVERSITY, KOTTAYAM

In partial fulfillment of the requirement for the award of the

Masters Degree in Business Administration (MBA) (2009-2011)

BY NAKUL GANGADHARAN
Register No: 10802

RAJAGIRI COLLEGE OF SOCIAL SCIENCES

RAJAGIRI VALLEY
KOCHI-683104

DECLARATION

I, Nakul Gangadharan, Student of Rajagiri College of Social Sciences, Kochi, here by declare that this project report titled A study on the impact of advertisements, reference group and brand perception on the purchase involvement of customers in Chennai with regard to TVS tyres. is an original work done by me and submitted to the Rajagiri College of Social Sciences, for the award of Masters Degree in Business Administration.

I further declare that any part in this project itself has not been submitted elsewhere for award of any other degree.

PLACE: Kakkanad DATE:

Nakul Gangadharan Rajagiri College of Social Sciences. (Reg. No. 10802)

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ACKNOWLEDGEMENT
First and foremost, I would like to express my sincere gratitude to my faculty guide, Prof. K.Tharu Benny. I was influenced by his style of functioning and the specific guidelines that he gave us helped me to go about this project with great ease. This kindled my enthusiasm further and encouraged us to boldly step into what was a totally dark and unexplored expanse called research. I would also like to thank my guide at TVS SRICHAKRA LTD, Mr. J Karunakaran, (Jr. Manager, Technical Services) who was there with a positive comment all the time and with his sense of humour made me feel comfortable. Last but not least, I would like to thank God Almighty for instilling me with belief, joy and compassion and for helping me learn new things in this endeavour.

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LIST OF CONTENTS.
Sr. No. 1. 2. 3. 4. Title Page Acknowledgement ABSTRACT SECTION I Industry Profile Company profile: a) TVS b)TVS SRICHAKRA LTD Products/Services Financial results Mc Kinseys 7S Model of TVS Srichakra Ltd SWOT Analysis 06 09 10 11-12 13-16 15-16 17-22 23 Particulars Page No. 01 02 03

5.

SECTION II Title & Back ground of study Research Methodology Theoretical frame work Presentation & Data Analysis Findings & Conclusions 25 26 27 28 30 32 34 34-38 40 41-46
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6. 7.

Bibliography Annexure

EXECUTIVE SUMMARY
The project intends to find out what are the decisive factors that influence the purchase involvement of a customer with respect to TVS TYRES in the city of CHENNAI. There are several factors on which this depends. Of these advertisement impact, reference group impact and brand perception are chosen for the study. It is widely accepted nowadays that an existing customer is more valuable to a company than inducing a new customer. Hence the study of buying decisions and his perceptions are extremely relevant in this competitive scenario. The study intends to reveal which among the above stated factors influence the purchase involvement of a customer thus helping the company to concentrate its efforts in the right channel.

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Section I INDUSTRY & COMPANY PROFILE

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INDUSTRY PROFILE
Dunlop Rubber Limited set up the first tyre company in West Bengal in 1926. Thus starts the history of tyre industry in India. MRF started its operations in 1946. Since then, the Indian tyre industry has grown rapidly.

Capital Intensive Industry

Tyre Industry is one of the raw material intensive industries in India. Raw material cost accounts for nearly 62% of tyre turnover and 70% of the production cost. Natural Rubber is the key raw material for the tyres followed by Carbon Black. The Tyre Industry consumes 58-60% of the domestic Natural Rubber produced, and the Carbon Black accounts for the rest of the raw material cost of the industry. Apart from being capital intensive, the tyre industry is highly raw material intensive. Any change in the prices of raw materials directly affects the profitability of tyre companies. The raw materials used in the manufacture of tyres are rubber and petroleum derivatives like nylon tyre cord, carbon black, styrene butadiene rubber and poly butadiene rubber. The most important raw material is rubber-natural and synthetic. Natural rubber (NR), with 29% weightage in the cost of raw materials used by tyre industry, is the highest cost item. Annual consumption of Natural Rubber by tyre industry is 3.50 lakh tonnes, valued at Rs. 14 billion. Over 85% of Natural Rubber consumed by the industry is procured domestically. 15% of Natural Rubber is imported.

Industry Performance
Industry was on a smooth ride till Fiscal Year 08. The industry tonnage production registered a 5-category of Truck & Bus (T&B) tyres recorded a 5-year CAGR of 5.90% while Light Commercial Vehicle (LCV), motorcycle and car tyre categories grew at 13.34%, 12.27% and 13.98%, respectively in this period.

However, as the economy in general; and automobile industry in specific slowed

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down in FY09, the tyre demand too came under pressure. In the first nine months of FY09, the industry managed a tonnage growth of only 2.19% against a growth of 7.38% in the same period

last year. The tyre offtake to the Original Equipment Manufacturers (OEMs) declined by 6.17% during this period. Also in the face of global slowdown and stiff Chinese competition, the export market offtake declined by 9.82% during this period.

Government steps in
The tyre industry saw production adjustments from all the major players in the last couple of months. The government too tried to provide external stimulus by effecting 6% excise duty cut across industries (the excise duty for tyres was brought down from 14% to 10% w.e.f. December 7, 2008, and then further reduced to 8% w.e.f. February 25, 2009). One silver lining for the industry has been the easing of the raw material prices from September 2008 onwards. However, the impact of the fall in commodity prices was not visible in the nine months results of the companies, as the companies were laden with high-price inventories. The benefits of the sublime raw material prices will become visible only in the last quarter of FY09, provided, the demand too is high.

Import Threats

The tyre industry faces competition from China in the domestic market. Imports as a percentage of total T&B tyre production stood at 10% in FY08, with more than 90% of these imports coming from China. While the anti-dumping duty is levied on the import of Chinese T&B bias tyres, the industry now wants it to be extended to Chinese T&B radial tyres to alleviate the import threat. In addition, the industry is also keen on customs duty relief on raw materials not produced/manufactured in the country so as to compete with the Chinese tyres. India has entered into some regional trade agreements, which make the customs duty on import from select countries even lower. The Asia Pacific Trade Agreement permits tyre imports at 8.5% for passenger car tyres and at 8.6% for two wheeler tyres.
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Likewise, South Asian Free Trade Agreement (SAFTA) facilitates nil customs duty on tyres imported from Bangladesh, Bhutan, Maldives & Nepal and at 5% from Pakistan and Sri Lanka. Similarly, Indian Singapore Agreement provides for tyre imports without any customs duty. Thus, the effective customs duty on total tyre imported is far less than 10%, and hence ATMA seeks cut in customs duty on Natural rubber from 20% to 7.5%.
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Besides rubber, the Industry imports much of the proportion of other key raw materials like PBR, Steel Tyre cord, Nylon Tyre cord and Rubber chemicals. As much of the industry's demand for the above raw materials was not met locally, industry seeks reduction of customs duty on Nylon Tyre Cord, Steel tyre cord fabric and PBR from existing 10% to 5% each, and slash customs duty on Rubber chemicals from 7.5% to 2.5%.

The industry is looking for wavier on customs duty on some materials which were not produced domestically like; Butyl Rubber, Polyester Tyre Fabric, and Styrene Butadiene Rubber.

The industry has also asked for waiver of Customs Duty on Tyre manufacturing machinery, (like Machinery (for working rubber), Extruders, Moulding / retreading tyres / inner tubes and other machinery along with parts) which will accelerate the pace of radialization in the country.

Besides these, any measure taken for Automotives will also help tyre industry.

Growth Estimates

Though in FY09, we expect the industry to register a tonnage growth of only 4.27%, the growth is expected to be higher in the medium and long run. In FY10, CARE Research expects the industry to post a growth of 6.81% and the industry growth is expected to touch 8.21% on a CAGR basis between FY08-13. The T&B and LCV tyre categories are expected to register a 5-

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year CAGR of 6.83% and 8.97%, respectively during this period.

The tyre industry in India stands at around Rs 22,500 crore in FY 09. Truck and bus tyres account a major portion (65%) of the industry's turnover. According to the statistics of ATMA -Automotive Tyre Manufacturers Association, tyre production in November 09 has jumped up by 23% to 85.63 lakh tyres as against 69.61 lakh in the corresponding previous year. Truck and bus tyres grew by 17% to 12.19 lakh tyres, passenger car tyres grew by 33% to 18.51 lakh tyres, and motorcycle tyres grew by 29% to 32.38 lakh tyres in November 09.

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TVS- COMPANY PROFILE

TV Sundaram Iyengar & Sons Limited established in 1911, is the parent company of the TVS Group and is a leading automobile distribution company in India. During the year 2006-07, the company attained a turn-over of Rs.4090 crores and has employee strength of 5000. It operates through its three divisions namely TVS, Sundaram Motors and Madras Auto Service. Being the trading & distribution arm of the group , the business activities of TVS & Sons include dealerships for automobile vehicles, distribution of spares for after-market, sales and service support for garage equipment, sales and service of products for special applications like construction of material handling and providing customer centric services for car customers under the brand My TVS.

The global business operation of the company includes managing joint ventures/alliances in Africa, Bangladesh, Sri Lanka, Thailand, UK, USA & Europe for automobile distribution/dealership business, sourcing and supply chain related activities.

TVS & Sons distributes commercial vehicles, utility & sports utility vehicles, passenger cars representing various leading automobile vehicle manufacturers such as Ashok Leyland, Daimler Chrysler, General Motors, Honda & Mahindra. The company has more than 150 outlets and sells over 50,000 vehicles per annum being the leading automobile distribution company in India.

The company is also the largest distributor of automobile spare parts in the country, handling more than 80 suppliers, 5000 customers and 35,000 part numbers and also markets TVS Quality branded products. There are altogether 44 companies under the umbrella of the TVS Group.

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TVS SRICHAKRA LTD.

TVS Srichakra Ltd is a member of TVS Group of companies, the largest auto ancillary group in India was found in 1982. TVS Srichakra, the no.1 in motorcycle tyres, is a leading manufacturer of tyres and tubes for two and three wheelers in India and has a large programme of off the road tyres for the export market. TVS Srichakra has large share with the vehicle manufacturers which include Bajaj Auto, Hero Honda, TVS Motors, Yamaha Motors etc. TVS Srichakra has a significant presence in the aftermarket across the country and has carved out a fine reputation in service and support to the dealers, mechanics and consumers. Backed up by excellent R&D, availing service of renowned technologists and test riders from Japan, TVS Srichakra brings out innovative patterns of their newer tyres including single radius/uni-directional tyres for series of new vehicles being brought out. Accredited in 1990 with ISO 9001 certification; TVS Tyres adopted strong quality standards from its inception and these benchmarks were further strengthened with the certification of ISO 14001, ISO 9001-2000 and TS 16949. The company has other practices like six-sigma and lean manufacturing techniques in place to abide by their high quality standards. TVS Tyres was also the winner of prestigious TPM excellence award in 2003 and TPM consistency award in 2005. TVS Srichakra with their EUROGRIP programme for overseas market on its off the road tyres has been expanding consistently over the years. TVS Srichakra is a global player and has major OEM accounts in Europe and is exporting to over 50 countries in all the 6 continents.

ISIN Code

INE421C01016

BSE Demat Code

509243

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BSE Listing group

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NSE Scrip Code

TVSSRICHAK

Face value (Rs) Beta 0.93

10.00

Listed On

Bangalore, Bombay, Madras, National Stock Exchanges

MARKETING
Two Wheeler Industry which has shown a negative growth in the last year has moved to a positive growth of around 5% in the year ending 31.3.09. The growth has been in both motorcycle and scooter segments. The Company has grown by around 8.5% against the Industry growth of 5%. This was possible by increasing presence in market by way of increasing the share of business with the vehicle manufacturers. The After Market continues to be buoyant. Strengthening our dealer network and intense focus through the sales

EXPANSION
The Company has increased its installed capacity by approximately 1,00,000 tyres and tubes per month, during the current year.

The Company has commissioned a plant at Uttrakhand and commercial production from this plant is expected to boost the prospects of the company in the years to come.

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MANAGEMENT DISCUSSION AND ANALYSIS REPORT FOR THE YEAR ENDED 31ST MARCH 2009.

1. Industry Structure and Development

Automobile industry will continue to be the growth engine for economies and Tyre industry demand depends primarily on the automotive industry. The off take and growth in the OEM market of the Company is directly related to new vehicle sales and the market share.

Manufacturing, Distribution and Sales of Tyres, Tubes and Flaps primarily for the Two / Three Wheeler segments in the Domestic market, and larger tyres for Agricultural and different Industrial segments in the Export market, are the main business functions of the Company.

The year ended, threw a difficult and complex business scenario, mainly because of downturn in global economy, spiraling raw material prices and fluctuating demands. Though, Two Wheeler industry registered a growth of 5%, thanks to the rural sector of our country still having money power to spend, high interest rates, postponement of purchases by consumers due to global recession in the second half of the year, the first three quarters of the year ended seeing steep increase in raw material prices and fluctuation in exchange rates, did have its impact in overall business.

Unprecedented increase in the price of Natural Rubber and Synthetic Rubber in particular, as well as other Petroleum based raw materials necessitated the manufacturers to hold higher inventories and opt for spot purchases. Since Tyre industry is not only a highly capital intensive industry as well as a labour-oriented industry, power scarcity has also been of a great concern, in addition to high material cost.
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2. Discussion and Analysis Market:

Original Equipment Manufacturers:

Last year, though Company could register a growth in volume and value, higher than the industry growth, contribution continued to be a point of concern, in view of sustained fluctuation in raw material prices. Innovative technologies, entry into premium segments and increased market share have helped the company to withstand to an extent the cost pressures.

After Market:

The Company continues its good performance by registering a significant growth in both value and volume during the year also, through its concentration in Semi-Urban and Rural markets, involvement in Sales Promotion Activities and bringing in newer products in Motorcycle tyre segment.

Export:

Exports showed a good growth in the first half of the year ended, but as the global recession started in October 2008, demand and sales dropped down. The Company embarked upon newer products in Agricultural segment, new Distribution Channels and an increase in Motorcycle tyres exports, thereby the overall Export revenue showing an increase last year.

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Manufacturing:

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The Company continued its initiatives in sustaining the manufacturing excellence, derived through TPM recognitions by working on increased productivity, lean and flexible manufacturing systems and Empowered work teams for Workmen and targeting continuous cost compression. The Company won for the 4th successive year, the Energy Conservation Award, from the Government of India, and also IMEA Award for manufacturing excellence in the Tyre industry.

3. Outlook

Two-Wheeler Industry recorded a growth of around 5% in the year ended on 31st March'09. The Company recorded a higher growth than the average industry growth.

Market indications are that this year will see the Two Wheeler industry sustaining its growth and quite a few newer models will be launched in 2009-10. The Company continues to enjoy the highest market share with the vehicle manufacturers and most of the newer models will sport TVS Tyres.

After Market continues to throw open greater opportunities in this year also with increased demand, more so in Semi-Urban and Rural markets of the country. The Company will continue its focus in strengthening the Dealer Network, sustaining the Promotional Activities through a close interaction with Dealers, Mechanics and Consumers, thereby aiming towards increased market share and expanded volumes in this year.

As overseas markets, primarily Europe and USA, continue to reel under recession. The Company expects to sustain the export turnover of the year under review during the year 2009-10 also, through introduction of new products and adding more Distribution Channels.

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The Company is confident of showing an overall growth in this year also.

4. Risks and Concerns External Risks:

Fluctuating raw material prices would necessitate constant price revision with vehicle manufacturers.

Fear of continued down turn in global economy, thereby postponing the new vehicle purchase and lower support from Banks on loans could result in drop in vehicle sales.

Highly Volatile Foreign Exchange fluctuations.

Power scarcity resulting in increased Conversion Cost.

Strategic sourcing and spot purchasing necessitating higher funds availability.

The Company has a structured FOREX Policy in place with the following objectives:

1) Ensuring adequate hedging of the Company's exposure in Forex, viz. exports, imports and loans. Hedging is done up to a certain level of total exposure and certain portion of exposure is left uncovered to take care of market dynamics.

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2) Hedging / covers are taken based on Bench mark rate, for various currencies.

Internal Risks:

* Dependence on OE Customers, though After Market share in overall sales has gone up.

* Competition from low cost manufacturers in After Market.

* Continued recession in USA and Europe affecting the Export Market.

The past years have seen the share of After Market sale going up, thereby reducing the Company's dependency on a few OEMs. Developing tyres for premium segment of vehicles, launch of high technology tyres for Motorcycles such as Tubeless tyres, increased fitment of the tyres of The Company in Export vehicles, added to the positive steps for the future.

Risk Assessment Study across the Company is being continued through outside consultants and actions initiated then and there.

Adequate insurance cover, wherever the risk exists, has been done by The Company.

All safety requirements and norms of various Governmental Agencies are being fully applied

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with by The Company.

5. Internal Control Systems

The Company has an adequate system of internal control, designed to provide reasonable assurance on the achievement of the objectives relating to efficiency and effectiveness of operations, reliability of financial reporting, compliance to applicable laws and regulations and for safe guarding of assets. The Company's internal auditors evaluate the internal control in design and in operation; their observations are reviewed by the Senior Management and the Audit Committee.

6. Discussion on Financial Performance With Respect To Operational Performance

Particulars Sales and Labour charges Other Income Net profit 64289 143 901

Rs. in lakhs

7. Cautionary Statement

Certain statements in the Management Discussion and analysis describing the Company's views about the industry, expectations, objectives etc. may be forward looking within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed in the

developments etc. may influence the Company's operations or performance.

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in Government regulations, tax laws and other factors such as industrial relations and economic

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statement. Factors like supply and demand situations, input prices and their availability, changes

PRODUCTS/SERVICES Tyres &Tubes for 2& 3 wheelers.

A wide range covering industrial forklift tyres, lawn and garden tyres, Agro industrial tyres, farm and implement tyres, multipurpose tyres, tractor tyres, floatation tyres, Motor grader tyres, sand tyres, vintage tyres and special purpose tyres. Features are Specially engineered design according to specified norms gives superb road grip. Optimised radius for excellent driveability. Rugged looking tyres suitable for all track conditions. Studs extended up to shoulder for better cornering. Re-inforced casing for absorbing shock impacts. Good aesthetic appearance

VARIOUS 2 WHEELER TYRE PRODUCTS

ATT 400 RIB Front in the sizes of 2.5-18,2.75-18 ATT 325 ATT 425 ATT 175 Rear ATT 250 Rear STAR
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STAR +

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STUD ATT 525 JUMBO DRAGON RAKSHA (moped) STYLO (moped) CONTA 250 (moped). These are the popular products from the range of products that SRICHAKRA offers. These tyres are again classified on use for FRONT/ REAR, on the ply rating, again on size(2.7518,3-18..). Each tyre has a permissible maximum load and permissible inforcible pressure.

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CENTRAL MARKETING OFFICE

5TH FLOOR, SUDHARSHAN BUILDINGS 15, WHITES ROAD ANNA SALAI-CHENNAI-14.

HEAD OFFICE
TVS SRICHAKRA LIMITED. Regd. Office: TVS Building, 7-B, West Veli Street, Madurai 625001. PLANT :1 Vellaripatti Village, Melur Taluk Madurai District - 625122 Tamil Nadu India

PLANT :2 Plot No.7, Sector - 1, Integrated Industrial Estate, SIDCUL, Rudrapur, Tehsil - Kichha, Pantnagar - 263153 Uttaranchal India

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FINANCIAL RESULTS
TVS SRICHAKRA LIMITED. Regd. Office: TVS Building, 7-B, West Veli Street, Madurai 625001. FINANCIAL RESULTS (AUDITED) FOR THE YEAR ENDED 31.3.2010 Rs.in lakhs PARTICULARS 9 months ended 31.12.2009 Unaudited (2) 49902.62 458.26 874.97 29782.88 3673.19 877.81 10942.24 46151.09 Quarter ended 31.3.2010 Unaudited (3) 20167.92 110.23 486.85 11960.22 53.02 1815.89 301.08 3972.37 18589.43 Quarter ended 31.3.2009 Unaudited (4) 14148.54 (12.99) 22.96 8773.05 1151.72 243.06 2993.23 13184.02 Year ended Year ended 31.3.2010 31.3.2009 Audited (5) 70070.54 568.49 1361.82 41743.10 53.02 5489.08 1178.89 14914.61 64740.52 Audited (6) 57635.07 143.09 (635.43) 39610.61 63.51 4288.42 987.66 10288.60 54603.37

(1) 1 (a) (b) 2 (a) (b) (c) (d) (e) (f) (g) Net Sales/Income from Operations Other Operating Income Expenditure (Increase) / Decrease in Stock in Trade and work in progress Consumption of Raw Materials Purchase of Traded Goods Employees Cost Depreciation Other Expenditure Total (Any item exceeding 10% of the total expenditure to be shown separately) Profit from Operations before Other Income, Interest and Exceptional Items (1-2) Other Income Profit before Inerest and Exceptional Items (3+4) Interest Profit after Interest but before Exceptional Items (5-6)

3 4 5 6 7 8 9

4209.79 4209.79 1018.00 3191.79 3191.79 997.54 2194.25

1688.72 1688.72 543.32 1145.40 1145.40 357.85 787.55

951.53 951.53 471.69 479.84 479.84 112.96 366.88 366.88 765.70

5898.51 5898.51 1561.32 4337.19 4337.19 1355.39 2981.80 2981.80 765.70

3174.79 3174.79 1859.08 1315.71 1315.71 415.00 900.71 900.71 765.70

Exceptional Items Profit (+)/Loss (-) from Ordinary Activities before tax (7+8) 10 Tax Expense 11 Net Profit (+)/Loss (-) from Ordinary Activities after tax (9-10) 12 Extraordinary Items ( Net of Tax Expenses) 13 Net Profit (+)/Loss(-) for the period (11-12) 14 Paid -up Equity Share Capital ( Equity Share Capital of Rs.10 Each) 15 Reserves excluding Revaluation Reserves as per Balance Sheet of Previous Accounting Year 16 Earnings per Share ( EPS) (a) Basic and Diluted EPS before Extraordinary Items for the period, for the year to date and for the previous year (Non annualised) (b) Basic and Diluted EPS after Extraordinary Items for the period, for the year to date and for the previous year (Non-annualized) 17 Public Shareholding -Number of Shares -Percentage of Shareholding 18 Promoters and promoter group shareholding (a) Pledged /Encumbered -Number of shares - percentage of shares (as a % of the total shareholding of promoter and promoter group) - percentage of shares (as a % of the total share capital of the company) (b) non -encumbered - number of shares - percentage of shares (as a % of the total shareholding of promoter and promoter group) - percentage of shares (as a % of the total share capital of the company)

2194.25 765.70

787.55 765.70

28.66

10.29

4.79

7817.20 38.94

5731.23 11.76

28.66

10.29

4.79

38.94

11.76

4458775 58.23%

4440647 57.99%

4577713 59.78%

4440647 57.99%

4577713 59.78%

Nil Nil Nil

Nil Nil Nil

Nil Nil Nil

Nil Nil Nil

Nil Nil Nil

3198275 100.00% 41.77%

3216403 100.00% 42.01%

3079337 100.00% 40.22%

3216403 100.00% 42.01%

3079337 100.00% 40.22%

6. Figures for the corresponding previous period have been recast/regrouped, wherever necessary, to make them comparable.

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Notes : 1. Presently the Company operates only in one segment. 2. An interim dividend of Rs.10/- per share has been paid during the year. No further dividend has been recommended by the Board of Directors. 3. The Plant capacity in respect of tyres and tubes have been increased from 122.05 lakh nos of tyres and 128.66 lakh nos of tubes respectively, to 321.53 lakh nos of tyres and 300.5 lakh nos of tubes, per annum. 4. Status of investor grievances for the quarter ended 31.3.2010: No.of complaints pending as at 1.1.2010 - Nil; Received during the quarter - Nil; Disposed during the quarter - Nil; Lying unresolved as at 31.3.2010 - Nil. 5. The above Audited Financial Results were reviewed by the Audit Committee, approved by the Board of Directors on 28th May 2010

STATEMENT OF ASSETS AND LIABILITIES - YEAR ENDED 31.3.2010 Rs. In lakhs As on As on 31.3.2010 31.3.2009 Audited Audited 765.70 765.70 7817.20 5731.23 17445.53 15721.69 747.42 742.03 26775.85 22960.65 11538.14 7229.29 261.04 124.50 15543.59 6539.30 11893.60 10658.66 858.35 1326.01 3240.78 2732.85 31536.32 21256.82 16351.56 5058.41 208.09 591.55 16559.65 5649.96 14976.67 15606.86 26775.85 22960.65 By Order of the Board SHOBHANA RAMACHANDHRAN MANAGING DIRECTOR

Particulars

SHAREHOLDERS' FUNDS (a) Capital (b) Reserves and Surplus LOAN FUNDS DEFERRED TAX LIABILITY (Net) TOTAL FIXED ASSETS INVESTMENTS CURRENT ASSETS, LOANS AND ADVANCES (a) Inventories (b) Sundry Debtors (c) Cash and Bank balances (d) Loans and Advances (A) Less : Current Liabilities and Provisions (a) Liabilities (b) Provisions (B) Net Current Assets TOTAL

Place : Chennai Date : 28.5.2010

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McKinseys 7s model of TVS SRICHAKRA LTD.

Strategy:

What is our strategy? Strategy is to extensively use the available network of the parent company and to focus on the Original Equipment Market. However, nowadays company is venturing to replacement market as well. ONUS is on gaining market share and more money is pumped in to the R&D segment.

How are changes in customer demands dealt with? TVS SRICHAKRA was the first in INDIA to launch tube-less puncture resistant tyres. The company is the first to analyse change in customer trends and evolve new products.

How do we deal with competitive pressure? Company has more partnerships with two wheeler manufacturers for stock tyres. Now focusing more on Advertising.

How is strategy adjusted for environmental issues? Company has implemented ISO 14001. Environmental Management System.

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What is the hierarchy?

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Structure:

MD
Mrs.Shobana Ramachandran

VP(Mktg)

(Mr. Siva subramaniam)

GM(Mr.William )

VP(strategic planning) GM

AGM(Domestic) (Mr.R S PILLAI)

Regional Mgr(Mr. V
Natarajan)
AGM(Intnl) AGM RM Regional Mgr District

District Mgr Sales executive

The company has various divisions such as strategic Planning & Development, HR, Planning Marketing(Domestic, International), Finance , production etc.

How do the team members organize and align themselves? They work on a tight noose by reporting to the top brass all the time. The team members me work extensively and support is obtained from sister concerns like TVS MOTORS. MOTORS

How do the various departments coordinate activities? Extensive telecommunications and the use of emails and internet make possible the coco ordination of various activities. As the TVS Group has more than 44 companies under its umbrella often we can find their operations going hand in hand. They have made a mark on all walks of life.

Is decision making and controlling centralized or decentralized? Decision making and control is centralized and all actions require flag off from the concerned authorities at the helm. Since all the top brass work hard and use latest communication techniques this does not hinder the progress of the company.

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Systems:

What internal rules and processes does the team use to keep on track? Strict reporting on a timely basis and maintenance of status quo. Extensive and fast communication.

What are the main systems that run the organization? Production facilities incorporates Lean manufacturing and six-sigma techniques. The other systems are EMS- environmental Management Systems.(ISO 14001 and ISO TS 16949:2002)

Where are the controls and how are they monitored and evaluated? Management handles the control and strict hierarchical models are in place for the monitoring of all processes and transactions.

Shared Values:

How strong are the values? They are rooted to their core values and believe in loyalty and truthfulness. Commitment of the employees brings in rich rewards whereas fraud and foul is not all tolerated.

What are the fundamental values that the company/team was built on?

TVS SRICHAKRA - Mission

We are committed to being a highly profitable, socially responsible, and leading manufacturer of high value for money, environmentally friendly, lifetime personal transportation products under the TVS brand, for customers predominantly in Asian markets and to provide fulfillment and prosperity for employees, dealers and suppliers.

What are the core values? Trust , reliability, values , service and ethics.

What is the corporate/team culture? Vibrant, transparent and entrepreneurial culture.

Do employees/team members tend to be competitive or cooperative? They tend to be co operative in all the endeavours. They believe in team work.

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Style:

How participative is the management/leadership style? The management is participative indeed, innovative and inspiring.

Staff:

Are there gaps in required competencies? NO. The best persons for the job are sitting in the posts. There are about 3830 persons working for the company.

Skills:

Are there any skills gaps? The company is doing extensive R&D on its own to increase its technological prowess and quality.

RESEARCH & DEVELOPMENT (R&D)

1. Specific areas in which R & D carried out by the Company : a) Introduction of Tubeless tyres for Motorcycles. b) Range expansion in Export segment. c) Newer, application oriented patterns for the After Market and customer needs. d) Product quality improvement through continuous process improvements. Export, to satisfy various

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a) Entry into more Export markets.

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2. Benefits derived as a result of the above R & D:

b) Improved replacement market share. c) Ability to introduce products as required by market. d) Entry into new OEM for Motorcycle tyres. 3. Future Plan of Action: a) To introduce increased automation for capability improvement, and manufacture of superior products. b) Introduction of futuristic new products for Domestic After Market c) Diversification of product range in export with technology up-gradation. d) New pattern for different class of customers for both Original Equipment and After Market.

4. Expenditure on R&D: a) Capital b) Recurring c) Total d) Total R & D expenditure (percentage of total turnover )

Rs. in lakhs 27.67 574.45 602.12

0.94%

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TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION:

1. Efforts in brief, made towards technology absorption, adaptation and innovation : Introduction of new products resulted in higher growth in all markets. Improved consistency in quality of product.

2. Benefits derived as a result of the above efforts: Company was able to develop a whole range of new products for OEM, Replacement Market and Export Market, in the shortest development cycle time.

What are the strongest skills represented within the company/team? Good and pleasant inter personal skills, highly devoted and committed personnel.

Do the current employees/team members have the ability to do the job? They are efficient and effective in their job.

How are skills monitored and assessed? The HR department monitors and does the performance appraisal.

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LIST OF BOARD OF DIRECTORS

Board of Directors for the Year : 31-Mar-09

T V S Srichakra Ltd.

Directors Name S Narayanan R Naresh Shobhana Ramachandhran M S Viraraghavan N H Atthreya J V Raghavan Sitaram Rao Valluri P Vijayaraghavan S Ravichandran T Chinnadurai L R Subramanian

Designation Ch Exec. Vice Ch Md Director Director Director Director Director Addnl. Director Addnl. Director Secretary

Board Meetings Attended 5 4 5 4 5 0 5 2 0 0 0

GROUP DISTRIBUTORS

Madras auto Service. IMPAL- Indian Motor Parts & Accessories Services Limited. Sundaram Motors. TVS Iyengar & Sons.

MAJOR COMPETITORS
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MRF, Dunlop, Birla Tyres, Ceat.

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SWOT ANALYSIS STRENGTHS

Part of TVS Group. Interconnected business network and dealership network of parent company. Stronghold in South India, especially Tamil Nadu. Expertise in auto components. Market leader in OE 2 wheeler tyres. Tie up with Many companies like Bajaj, Yamaha, Hero Honda. Recently opened state of the art production plant.

WEAKNESSES
Misconception about quality of TVS Tyres in the minds of people. Not ventured in to Truck and Bus tyre segment. More complaints reported on bad performance of tyres. Technological knowhow is less. Lesser expenditure on advertising.

OPPORTUNITIES
Truck and Bus tyre segment. Radial tyre segment. Hydrogen and other inert gas filled tyres segment. Improve upon quality. Research and development opportunities.

THREATS

Mega advertising campaigns of other companies.

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Government regulations and rules from time to time.

SECTION II PROBLEM CENTERED STUDY

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TITLE OF THE STUDY A Study on the Impact of Advertisements, Reference Group and Brand Perception in the purchase involvement of Customers in Chennai with regard to TVS TYRES.

BACK GROUND OF THE STUDY

The company is now focusing heavily on advertising with its RIDE SMART WITH ROAD SENSE campaign roping in top industry ad-makers like M/s Ravi Udyawar films ltd. These advertisements are being aired from early 2010 onwards in all leading Television channels. Hence the company would like to know the impacts of these advertisements on the buying perceptions of the company. Most of the buying decisions in the tyre segment are influenced by reference groups especially mechanics or friends. Hence it is good for the company to find out the impact of reference groups as well on the buying preferences of the customer. TVS SRICHAKRA falls under the umbrella of TV SUNDARAM IYENGAR & SONS which is a huge brand in CHENNAI and South India. Hence any study would be incomplete if we do not incorporate the impact that the whole brand makes on the buying perceptions of the customer.

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RESEARCH METHODOLOGY
OBJECTIVE OF THE STUDY
To study the impact of advertisement of TVS TYRES on the purchase involvement of customers. To study the impact of reference groups on the purchase involvement of customers. To study the impact of brand perception of the company on the purchase involvement of customers.

SAMPLING METHOD
Convenience sampling.

SAMPLE SIZE
150 two wheeler owners from the city of Chennai.

POPULATION
The two wheeler owners of the city of Chennai.

DATA COLLECTION METHOD

Questionnaires were used to collect primary data from the respondents.

Data Analysis
Data Analysis is done using multiple regression and other statistical methods.

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LIMITATIONS OF STUDY
Constraints of time. The study is restricted to the city of Chennai.

THEORETICAL FRAME WORK

Perception is the process by which organisms interpret and organize sensation to produce a meaningful experience of the world. Sensation usually refers to the immediate, relatively unprocessed result of stimulation of sensory receptors in the eyes, ears, nose, tongue, or skin. Perception, on the other hand, better describes one's ultimate experience of the world and typically involves further processing of sensory input. In practice, sensation and perception are virtually impossible to separate, because they are part of one continuous process. Thus, perception in humans describes the process whereby sensory stimulation is translated into organized experience. That experience, or percept, is the joint product of the stimulation and of the process itself. Relations found between various types of stimulation and their associated percepts suggest inferences that can be made about the properties of the perceptual process; theories of perceiving then can be developed on the basis of these inferences. Because the perceptual process is not itself public or directly observable (except to the perceiver himself, whose percepts are given directly in experience), the validity of perceptual theories can be checked only indirectly. Perceptions can comprise just about anything: fact, fiction, fantasy, whatever. If customers believe their perceptions, though, the perceptions have the weight of fact. That is why it is so important to reach out to customers and specifically ask them what they think. By their very nature, they probably wont agree with all the perceptions. A perception equals fact in the mind

youve done.

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of the customer, though. You must act on these perceptions and let the customer know what

Customer perceptions are what indicate whether you have achieved satisfaction or not. In other words, they represent stepping stones along a continuum. Perceptions accumulate over time and gradually equate to either satisfaction or dissatisfaction. The job is to understand and act on these perceptions so the final result is customer satisfaction.

BRAND PERCEPTION- Independent Variable

Brand perception/awareness, In general, means the extent to which a brand associated with a particular product is documented by potential and existing customers either positively or negatively. Creation of brand awareness is the primary goal of advertising at the beginning of any product's life cycle in target markets. In fact, brand awareness has influence on buying behaviour of a buyer. Brand awareness can be measured by showing a consumer the brand and asking whether or not they knew of it beforehand. However, in common market research practice a variety of recognition and recall measures of brand awareness are employed all of which test the brand name's association to a product category cue, this came about because most market research in the 20th Century was conducted by post or telephone, actually showing the brand to consumers usually required more expensive face-to-face interviews (until web-based interviews became possible). This has led many textbooks to conceptualise brand awareness simply as its measures, that is, knowledge that the brand is a member of a particular product category, e.g. soft-drinks. Examples of such measures include: Brand recognition - Either the brand name or both the brand name and category name are presented to respondents. Brand recall - the product category name is given to respondents who are asked to recall as many brands as possible that are members of the category. Top of mind awareness - as above, but only the first brand recalled is recorded (also known as spontaneous brand recall). Aggregate (brand) level, it refers to the proportion of consumers who know of the brand.

awareness metrics. Recently, an empirical study appeared to put this debate to rest by suggesting

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There has been discussion in industry and practice about the meaning and value of various brand

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that all awareness metrics were systematically related, simply reflecting their difficulty, in the same way that certain questions are more difficult in academic exams. The questions for measuring brand perception are taken from HESS (1997): PERCEIVED BRAND TRUST.

ADVERTISEMENT IMPACT- Independent Variable

The effect that advertisements plays in the decision making process in the mind of a customer is proven already. TVS SRICHAKRA had recently come out with a series of new ads. Hence the buying perception of the customer will certainly be affected. For measuring advertisement impact PDI (Persuasive Disclosure Inventory) (FELTHAM: 1994) was considered. Some of the elements in the ethos, pathos & Logos scale were incorporated. Leavitts reaction profile (Leavitt: 1971) was also kept in mind while framing the questions.

REFERENCE GROUP IMPACT-Independent Variable

Reference groups make a definite impact on the buying decisions of the customer. The main impact is thought to be made by the mechanics who attend to the two wheelers. Friends and relatives also influence the buying decisions. The studies of William.O.Bearden, Michael.J.Etzel were considered for framing the questionnaires.

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BUYING PREFERENCES- The Dependent Variable.

The customer buying decisions will be graded against the other independent variables namely advertisement impact, brand perception and reference group impact.

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PRESENTATION AND DATA ANALYSIS

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ANALYSIS
Multiple regression technique is used to find out the relation between the variables.

MULTIPLE REGRESSION
More than one independent variables to estimate the dependent variable were used and it is an attempt to increase the accuracy of the estimate. In multiple regression, we can look at each individual variable and test whether it contributes significantly to the way regression describes the data. The number crunching is done with the help of SPSS statistics packages software. Multiple regression analysis involves a three-step process. 1. Describe the multiple regression equation. 2. Examine the multiple-regression standard error of the estimate. 3. Determine how well the regression equation describes the observed data.

FINDING THE MULTIPLE REGRESSION EQUATION

Variables were selected based on already available standard study reports and questionnaires. All the eight variables used in the study of advertisement were taken and their average was defined as a new variable average ad impact (avgad) which is an independent variable. Similarly all the four variables used in the study of reference group were taken and their average was defined as a new variable called average reference group impact (avgrefgp), and the four variables used for measuring brand perception were taken and their average was defined as a new variable called average brand perception impact (avgbp). All the above defined variables are independent variables. The average of the variables used to measure customer buying perceptions is defined as the dependent variable (avgbuyp).

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=a+b1X1+b2X2+b3X3
is the estimating equation describing the relationship among the three variables where the independent variables are denoted by X1, X2, X3 and the dependent variable is denoted by , b1,b2,b3 are the slopes associated with X1,X2,X3 respectively and a is the y-intercept

STANDARD ERROR OF ESTIMATE FOR MULTIPLE REGRESSION

It gives a measure of dispersion around the multiple-regression plane. The estimation becomes more accurate as the degree of dispersion around the regression gets smaller. By using more variables and by doing multiple regression the standard error of estimate has come to a lower value. Thus the estimate has become more accurate.

THE COEFFICIENT OF MULTIPLE DETERMINATION (R2)

This coefficient of multiple determination is also the proportion of the total variation of that is explained by the regression plane. Note that the output in the Model summary table depicted below has the value of R2 as 0.405. This means that 40.5 percent of the total variation in the customer purchase involvement is explained by the three independent variables. It gives the proportion of the total variation in the dependent variable that is explained by the independent variables. TEST OF WHETHER A VARIABLE IS SIGNIFICANT OR NOT This is done by checking tc<t0<tc where tc is the critical value that is obtained from the students t-ratio table and t0 is the observed or computed t value.

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significant explanatory variable.

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It is only necessary to check that t0>tc and if that is true it is assumed that the variable is a

For the variable avgad, testing at 90% confidence level i.e., = 0.10 and n=150-3-1=146 tc=1.645 t0=1.918>1.645. Hence the variable avgad , impact of advertisements is a significant explanatory variable of the consumer purchasing involvement. For the variable avgbp, testing at 95% confidence level, i.e., =0.05 and n=146 Critical t value= 1.960 and obtained t value =6.498 Hence the variable avgbp, impact of brand perception is also a significant explanatory variable of the customer purchasing involvement. Similarly for variable avgrefgp at =0.05, n=146 the critical value of t from table is 1.960 and obtained t value is 2.696. Hence the variable avgrefgp, impact of reference groups is also a significant explanatory variable of the customer purchasing involvement.

INFERENCES ABOUT THE TEST AS A WHOLE (Using an F Test)

It is natural to ask whether the R2 value of the given multiple regression really indicates that the independent variables explain the dependent variable, or might have happened just by chance. Decomposing the total variation in the dependent variable SST=SSR+SSE SST= TOTAL SUM OF SQUARES (111.693) SSR=REGRESSION SUM OF SQUARES (45.263) SSE=ERROR SUM/ RESIDUAL SUM OF SQUARES (66.430)

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F= (SSR/K)/((SSE)/(n-k-1))

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F Ratio is defined as

The numerator is with k degrees of freedom and n-k-1 denominator degrees of freedom. When calculated at =0.05 with k=3 degrees of freedom and denominator 146 degrees of freedom F=3.78 is obtained. The calculated value of F=33.160 is way far above 3.78, so the regression is assumed to be highly significant. Also prominent is the fact that in simple regression , each variable is highly significant and in multiple regression, they are collectively very significant, but individually not significant. The relation between the independent and dependent variables can be explained as follows. 1. 22.2% proportion of the total variation in customer purchase involvement is explained by the impact of advertisements alone. 2. 45.3% proportion of the total variation in customer purchase involvement is explained by the impact of brand perception alone. 3. 50.9% proportion of the total variation in customer purchase involvement is explained by the impact of reference group alone.

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TABLE OF SPSS OUTPUT

Model Summary Std. Error of the Model 1 R .637a R Square .405 Adjusted R Square .393 Estimate .67454

a. Predictors: (Constant), avgrefgp, avgbp, avgad

ANOVAb Model 1 Regression Residual Total Sum of Squares 45.263 66.430 111.693 df 3 146 149 Mean Square 15.088 .455 F 33.160 Sig. .000a

a. Predictors: (Constant), avgrefgp, avgbp, avgad b. Dependent Variable: avgbuyp

Coefficientsa Standardized Unstandardized Coefficients Model 1 (Constant) avgad avgbp avgrefgp a. Dependent Variable: avgbuyp B 1.067 .222 .453 .509 Std. Error .354 .116 .070 .073 .159 .508 .513 Coefficients Beta T 3.010 1.918 6.498 2.696 Sig. .003 .057 .000

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.006

Findings:
All the dependent variables are highly significant explanatory variables. The multiple regression as a whole is highly significant. The 3 independent variables together explain about 40% of the variation in the purchase involvement of customers. Reference group is the variable with the highest impact on purchase involvement of customers followed by variables of brand perception and advertisement impact respectively.

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CONCLUSION

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CONCLUSION

This project brings forth the importance that reference groups play in the purchasing decision of TVS Tyres with regard to the City of Chennai. The reference group for tyres consists mainly of mechanics, friends and relatives. The brand image of the company is helping it tremendously. TVS is a super brand in Chennai and it has almost 44 companies in its umbrella. The stock tyre sale that TVS Tyres has with different companies and its own subsidiary TVS Motors is helping the company. The impact of advertisements lies last to all. The efforts put in the advertisement channel are in the right direction it will take some more time to reap the rewards. The impact of reference groups features first in the buying preferences of customers. Hence it will be good for the company to focus more on earning the goodwill of reference groups.

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BIBLIOGRAPHY

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Kotler, Philip, Kevin Lane Keller; Marketing Management, (2006), 12th ed.. Pearson Prentice Hall Donald R. Cooper , Pamela S. Schindler; Business Research Methods, (2004),Tata Mc Graw Hill Anderson P M and Robin L G, Marketing Communications: Advertising, Sales Promotion, Public relations, display and personal selling, (1986), Prentice Hall Ganesan, S. (1994), Determinants of long-term orientation in buyer-seller orientation in buyer-seller relationships, Journal of Marketing, Vol. 58. Ganesan, S. and Hess, R. (1997), Dimensions and levels of trust: implications for commitment to a relationship, Marketing Letters, Vol. 8 No. 4 William.O.Bearden, Michael.J.Etzel; Reference group influence on product and brand purchase decisions, journal of consumer Research, vol9, Sep 1982.

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ANNEXURE

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` QUESTIONNAIRE A SURVEY ON IMPACT OF REFERENCE GROUPS, BRAND PERCEPTION AND IMPACT OF ADVERTISEMENTS ON CUSTOMER BUYING PREFERENCE W.R.T TVS TYRES IN CHENNAI CITY. Name: Gender: M/F Age:

1. Have you ever seen a Tyre Co. Advertisement in T.V? 2. Have you ever seen a TV ad on TVS Tyres? 3. What appeal in the ad attracted you the most?

a)Yes a)Yes

b) No b) No

a) Masculine appeal b) Emotional appeal c) Animation and graphics d) Brand Appeal 4. How do you think the following factors are portrayed in the ad of TVS TYRES on a scale of 1-7? (1-strongly disagree, 2- disagree, 3-slightly disagree, 4-neutral, 5-slightly agree, 6-agree, 7-strongly agree) Liveliness Factor 1 2 3 4 5 6 7

Amusing Factor

Sensitiveness Factor

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` Familiarity Factor

Dependability Factor

Worth remembering

Trust worthy Factor

Informative

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` For the following questions (5-16) mark your responses on a scale of 1-7 where the meanings of numbers are (1-strongly disagree, 2- disagree, 3-slightly disagree, 4-neutral, 5-slighly agree, 6-agree, 7strongly agree)

5. TVS tyres is interested in more than just selling tyres and making a profit.

6. If TVS tyres make a claim or promise about its product, its probably true.

7. My TVS tyres is very reliable

8. If I bought another product from TVS tyres I feel like I would know what to expect.

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` 9. To make sure I buy the right product or brand, I often observe what others are buying and using

10. When buying products I generally purchase those products that I think others will approve.

11. If I have little experience with a product, I often ask my friends about the product.

12. In selecting from many types and brands of product available in the market, I would care a great deal as to which one I buy.

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` 13. Do you think that the various types and brands of a product available in the market are all very different

14. It is extremely important for me to make a right choice of the product

15. In making a selection for the product I am extremely concerned about the outcome of the choice

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