Case Study on Car Service Expansion in Main City of India

The population of Toyota vehicle on the road according to the survey made in 2002 by the company is around 40,000 and it's assumed to be 56,000 units in 2006 with an annual growth rate of about 5%. With the on-going expansion of road construction and consequent increase in access to roads, the demand for Toyota vehicles shall also grow significantly. The economy, taken in terms of real GDP, has shown an average growth rate of 6.4% for the last 5 years and as per IMF prediction it will continue to grow at approximately 6% over the next 20-years with the aim of reducing poverty. As economic growth continues and poverty is further eradicated, it is obvious that more and more individual, NGO's, governmental organization, Construction companies, Insurances and etc. will shift from other brands to a well-known brand products with positive brand image as a way to lower purchase risks. The effect of this occurrence leads to the beer market growth rate would be above the expected one. In aggregate, these situations imply that the future market for the automotive industry is very promising and attractive.

As a matter of fact, this encouraging market opportunity is attracting more and more new investment interests in the area and some are started assembling of vehicle locally. In addition, existing companies are showing inclination towards further branch network expansion so as to reap advantage out of the opportunity.

The Motor & Engineering Company of Ethiopia S.C. is the biggest one in the country with a very good potential for further branch network expansion. It currently assumes 18% service & 66% part sales of the served Toyota vehicle in the country market. In this regard, it is the largest and dominant in the market with a higher degree of customer preference at the moment. To meet this growing market demand, it has already completed branch network expansion program in Adama city and a test run up started. And now it reached at a current service capacity and market share of 5,200 unit of vehicle service, 21% of service market share, and 75% of part sales market share during the first six month test run up. This is in pursuant to its growth strategy with ultimate aim of maintaining its leadership position in the growing market. In line with the overall market development, the company intends to upgrade branch network expansion in the main cities of the country and improve its market share by providing quality service & genuine parts from the current capacity to a level of 60% for service & 90% for part sales within the coming ten Years' time.