Case Study

1. July 23, 2013 © 2012 Ipsos. All rights reserved. Contains Ipsos' Confidential and Proprietary information and
may not be disclosed or reproduced without the prior written consent of Ipsos.
Market Expansion Strategy in China Automotive Aftermarket
Proposal to Company ABC
Prepared by Jong-Sik Ahn

2. Case Study Requirements
For each case study requirements, please refer to the page below
2
1. Please conduct some desk research to gain a preliminary
understanding of the product and market in China
2. Provide a draft proposal focusing on the following:
a) Approach / Framework for this study to meet the
client’s objectives
b) Project Methodology including types of primary
research required
c) For the rest of the proposal, an outline of what should
be included is sufficient
Requirements Section Page No.
Project Background
Project Approach
p.5~8
p.12~19
Project Approach p.9~21
Project Methodology p.22~33
Project Management
Why Ipsos Business Consulting
p.34~35
p.36~37

3. Project Objectives
3

4. Project Objectives
The objectives of this project is to decide whether or not to invest in the production of
Company ABC’s starters products locally in China
4
Requirements
2012 market size in volume, inclusive of past 3 year growth and next 3 year forecast
Analysis of trends including drivers and barriers for this specific market segment
Assessment of the competitive landscape
Mapping of current channel structure
Recommendations on market expansion feasibility
1
2
3
4
5

5. Project Background
5

6. Global Automotive Market
In global automotive market, developing countries(especially China) are growing market.
Market polarization is intensified and technology is key success factors in this competitive
market
6
13.6
21.6
37.5
54.0
70.641.6
41.4
33.4
38.7
39.9
0.0
20.0
40.0
60.0
80.0
100.0
120.0
2000 2005 2010 2015 2020
Global Auto Market Forecasting
Advanced Countries
(* Source: IHS Automotive, KARI)
Developing Countries
-2.2% 1.8%
10.7% 6.5%
’00~’10 Yr ’10~’20 Yr
CAGR
Global Auto Market Trend
(Unit: mn passenger cars)
Markets
- The developing countries including BRICs have
high growth rate compared to the advanced
countries
- Among the developing countries, China is the
biggest and most attractive market for automotive
industry
Car Model
- The growth of small car is remarkable and M/S
increased from 41.1%(2000) to 50.6%(2011)
- Market polarization is intensified between low
price and premium cars
Technology
- Technology is developed in fuel-efficient, eco-
friendly, electrical device area
- Technology is key success factors in the
automotive industry

7. China Automotive Market
China automotive market will experience growth of 15% between 2010 and 2013, with
growth in market volume slowing down between 2013 and 2015 to 7%. The highest new
registrations can be seen in the major cities along the coast and Inner Mongolia
7
(* Source: China’s Automotive Market, Arthur D Little, 2011
The automotive aftermarket for passenger cars in China, Polk, 2012)
2010A 2011E 2012E 2013E 2014E 2015E
Locals Importers
China Automotive Market Volume Forecast
(Unit: mn passenger cars)
11.5
12.6
14.2
15.5
16.4
17.2
69%
31%
37%
63%
New Car Registration (2011)
Up to 6
6 up to 9
9 up to 12
12 up to 15
15 and more
Passenger vehicle 1 year old
per 1000 inhabitants
* If you want to know consumer trend in China auto market, please refer
to ‘ Industry/Market Model – Consumer Perspective’ section

8. Global Automotive Aftermarket
Based on a global growing car fleet and an increasing average fleet age in mature markets,
market forecasts show a strongly growing after sales market volume. This growth is mainly
driven by the rapidly growing service demand in emerging markets
8
(* Source: Automotive After Sales 2015, Arthur D Little, 2008)
105 134 154
20810
13
15
19
31
50
57
73
63
84
98
130
15
28
39
70
19
31
42
71
7
11
16
28
36
61
77
119
0
100
200
300
400
500
600
700
800
2001 2007 2010 2015
USA Canada Japan Western Europe
Eastern Europe Asia-Pacific Middle East South America
Global After Sales Market Value
(Unit: bn EUR)
Trends in After Sales Market
Increasing Competition
- Aggressive growth of independent fast fitters
- New players offering “low price parts”
- Internet as sales channel will gain higher
importance
- Second brand workshops by OEM
Structural Changes
- Stagnating new car sales volumes in triad
markets
- More and more cars in later lifecycles
Customer Requirements
- Differentiation of customer segments with
specific requirements
- Increasing demand of fleet and company cars
- Increasing product complexity

9. Project Approach
9

10. Project Approach Overview
Framework consists of three parts: 1) Industry/Market Model for the analysis of external
environment, 2) Operating Model for the analysis of internal capabilities, 3) Evaluation
Model for the selection of market entry strategy
Market
Political/
Legal
Customer/
Product
Competitor
Value Chain Channel Structure
Operating Model
Industry/Market Model
Competitive Position Assessment
Option
Generation
Evaluation Model
Market Entry
Strategy
Project Framework for Company ABC
10

11. Mapping Client’s Requirements
To meet the Company ABC’s objectives, project framework will cover Company ABC’s
requirements
11
2012 market size in volume, inclusive of past 3 year growth
and next 3 year forecast
Analysis of trends including drivers and barriers for this
specific market segment
Assessment of the competitive landscape
Mapping of current channel structure
Recommendations on market expansion feasibility
Client’s Requirements
1
2
3
4
5
Project Framework
Market
Political/Legal
Consumer/Product
Competitors
Value Chain
Channel Structure
Option Generation
Market Entry Strategy
Industry/Market
Model
Operating
Model
Evaluation
Model

12. Industry/Market Model – Market Perspective
The aftermarket volume will grow significantly during the next few years in China. Due to
the high number of new vehicles each year, and successive aging, a positive development in
the aftermarket is very likely to occur.
12
(* Source: The automotive aftermarket for passenger cars in China, Polk, 2012)
23
28
34
42
50
60
0
10
20
30
40
50
60
70
2010 2011 2012 2013 2014 2015
Aftermarket Size in China
(Unit: Bn. USD)
≤ 1 Year,
20%
2 Years,
20%
3 Years,
14%
4 Years,
9%
5 Years,
8%
6 Years,
6%
7 Years,
5%
8 Years,
4% ≥ 9 Years,
14%
Vehicle Age in China
Date: 1/1/12
* Basis: End user prices without labor costs and VAT
* 2010~2011 volume was recalculated based on CAGR(2012~2015)

13. 13
(* Source: Opportunities and Challenges in China’s Automotive Aftermarket, Technomic Asia, 2012)
Fragmentation in Parts Types
Fakes
Substitute
Value
Branded
OEM
Parts
100%
80%
60%
40%
20%
Relative Pricing
High
Relative Quality
Parts are generally segmented into 3 types in
the service market
- OEM parts(Zeng Chang Jian)
- Non-OEM parts(Fu Chang Jian)
- Fakes(Jia Jian)
1) Zheng Chang Jian
2) Fu Chang Jian
3) Jia Jian
Parts are generally segmented into 3 types in the service market. Distributors fall on a
spectrum between specialist and generalist
Distributor Types
Product
Breadth
Model Breadth BroadNarrow
Broad
Specialist
Covers limited number
of models and will
tend to go deeper in
product offering
Generalist
Will have wider model
coverage but tends to
have more limited
product line depth
Distributors fall on a spectrum between more
model/platform focused and product type focused
- In general, most are relatively small scale(<RMB
100 million) and regionally oriented
Industry/Market Model – Market Perspective

14. Industry/Market Model – Political/Legal Perspective
Government policies have both positive and negative effects on the aftermarket. As China
auto industry grows, the aftermarket should pay attention to the quality control of parts.
Local Government
Policy
(* Source: 2013 China Economy Outlook, KARI, 2013)
Auto Recall
Law
Due to the lack of public finance, the local government may
enforce the policy to boost consumer spending
The local government such as Anhui and Henan has reviewed
the policy to boost consumer’s auto spending
The central government enforced the law for the recall of
defective auto products
Auto recall law has extended scope of recall and strengthened
punishment about illegal activities
Sanbao Policy
Sanbao(repair/change/return) policy will be started in October
2013
Within 60 days from issuance of Sanbao receipt or 3,000 km
mileage, customer may select the free exchange if there are
defects in major parts such as engine, transmission
Policy
Positive
on volume
Negative
on quality
Positive
on quality
Description Effect
14

15. Industry/Market Model – Consumer Perspective
Due to the increase of middle class, C segment and SUV continued favorable tendency of
sales. If this trend continues, the aftermarket will grow and consumers may have lots of
choices to repair their cars with high quality and lower costs.
15
(* Source: 2011 World Automotive Market Outlook, KARI, 2011
The European Automotive Aftermarket Landscape, BCG, 2012)
Compact
Car
Due to sluggish demand of the middle
class which is price-sensitive, compact
car sales were decline
Due to the end of compact car
purchase tax reduction, demand for
A/B segment was decline
SUV
Due to the increase of the middle class
and demand for leisure activities, SUV
continued favorable tendency of sales
C Segment
Due to the increase of the middle class
in the central and western inland
regions, C segment(including low-price
C1 segment and old C2 segment)
continued favorable tendency of sales
Consumer Trend Future Consumer Trend in Aftermarket
High
Quality,
Lower
Costs
The most important criteria for
customers to select a repair shop will be
value for money and parts quality
Aftermarket will evolve to transparent
market and service costs will be declined
steadily
Branded
Chains
Decreasing
Customer
Loyalty
Branded chains will get the wide
recognition to consumers in the
aftermarket
Among owners of used and older
vehicles, the majority may favor
independent repair shops rather than
authorized repair shop
Numerous service providers with
different strengths will offer customers a
wide service selection

16. Industry/Market Model – Product Perspective
China domestic auto parts suppliers has low-cost competitiveness and go to the
aftermarket for low-cost vehicle repairs. Foreign auto parts suppliers manufacture high
value-added products such as engines, electronic parts, brakes.
16
Product
Volume
(2007)
Trend
Engine Filter 300 mil Directions of technological improvement
were minimization of environmental
pollution, improvement of durability,
miniaturization, modularization
Bearing Most of bearing for intermediate and
premium vehicles depended on the import
Radiator 25 mil Chief items of export
Transmission
of Power
Clutch 10 mil Top global parts suppliers from Germany
and USA extended their business to China
aggressively
Brake Drum
brake
In passenger cars, domestic products were
used only in cheap small car. Market share
for passenger cars was about 20%
Disc brake 10 mil Demand was increased fast recently
ABS Lack a sense of ABS (only 20% of all cars
were equipped ABS)
(* Source: The Outlook of China Auto Parts Industry, Korea Eximbank, 2009)
State-Owned Enterprise
- Medium-size
- Supplied auto parts to automakers
prior to opening markets
- Due to low technology development
capability and low market share,
business situation was worse
Private Enterprise
- Based on low price competitiveness,
they went to aftermarket for low-
cost vehicle repairs
Foreign-funded Enterprise
- Manufactured high value-added
products such as engines, electronic
parts, brakes, safety systems
- Supplied auto parts to other foreign
firms and China domestic firms
China Auto Parts Product and Trend

17. Industry/Market Model – Competitor Perspective
Nearly all well known international aftermarket service providers have started to make
inroads into the Chinese market, mostly via franchises, chain stores or auto supermarkets.
All the business models make use of the ‘one-stop’ concept of providing a full range of
products and service to satisfy customer demand
(* Source: China – Auto Aftermarket, US Commercial Service, 2009)
Company Description
Bosch China Bosch China, a one-stop shop with a full range of products and services and has plans to expand their
service network to 1000 centers in China by 2010.
Yellow Hat Yellow Hat, a Japanese leading car aftermarket service provider, it cooperated with Shanghai Automotive
Industry Sales Company to open its first chain store in Shanghai in 2005. The chain store is a one-stop
aftermarket station with a full range of products and services. As of June 2008, it had 13 chain stores in
China and has plans to open at least 500 stores before 2015.
Japanese
Autobacs
China
Japanese Autobacs China was set up in Beijing in 2005 and as of 2008 had 12 franchise stores in China. It
plans to expand to 100 stores within 5 years. It provides full range of auto aftermarket products and
services.
Shell China Shell China and SAIG set up a 50-50 joint venture company to promote the brand “Anji- Jellylube in 2005
with plans to grow the business to about 100 stores in Shanghai in the first three years with investments
of $30 million. It is currently close to its 100 stores goal.
Cinep China Cinep China was set up in Beijing in 1997 and their chain stores are all over China. Cinep cooperated with
Shell’s Pennzoil to sell Pennzoil’s “SNAP” products through its network. Cinep provides a full range of
products and services.
ACDelco Started in 1999, ACDelco is a trusted brand with a full range of maintenance replacement and repair
services. Their warehouse distributor network in China services over 100 ACDelco branded service centers
as well as the independent aftermarket. Since 2002, ACDelco has greatly expanded its business in China.
17

18. Operating Model – Value Chain Perspective
The important factors for auto aftermarket are cost and quality management. For these
factors, value chain management should be optimized and operated in cost-effective
manners
(* Source: The Outlook of China Auto Parts Industry, Korea Eximbank, 2009
OEM after sales strategy, Arthur D Little, 2008)
Aftersales
Support
LogisticsMarketing
and Sales
ManufacturingR&D
Foreign-funded
enterprise invested
R&D center in
China aggressively
Due to the
government
regulation and cost
reduction,
strengthened
localization of parts
sourcing
Due to poor
infrastructure and
cost reduction,
considered
options: in-house,
collaborative with
retailers or
outsourcing
Should be closely
linked with
production quality
processes
Value Chain for Production of Auto Parts
18

19. Operating Model – Channel Structure Perspective
In China, almost all auto workshops that directly offer services to auto aftermarket end
users try to provide a full range of aftermarket services. Products and services can reach
consumers through 1) authorized channels, 2) franchise/chain store channels, 3)
independent channels
(* Source: China – Auto Aftermarket, US Commercial Service, 2009)
Authorized
4S Shops
Franchise/
Chain Store
This is the major business model in China and it
occupies over 50% of total market share
The 4S shop is authorized by the manufacturer to sell
its vehicles and to provide the full range of
aftermarket services to buyers within the quality
guarantee period
Compared with building up and running a 4S shop,
the capital investment to set up and to run a
franchise workshop or chain store is lower
The prices of the products and services are generally
also lower than 4S shops, and the location for setting
up a store is much more flexible and is usually very
convenient to customers.
Independent
Repair
Shops
The rest of the market share is taken up by other
non-brand, small-scale workshops, workstations,
maintenance centers or body shops
Channel Description Advantage Disadvantage
4S shop take advantage
of manufacturers’ brand,
image and guarantee to
lock up almost all the
maintenance and repairs
and further aftermarket
service
Most manufacturers
have strict guidelines
that a 4S shop must
follow in order to
maintain the image of
the manufacturers’
brand
The model is mature and
systematic and has
proven to be very
successful in U.S,
Europe, and Japan for
distributing global
brands
Products and services
are only guaranteed by
the shops themselves
Limits customer demand
for aftermarket products
and services from chain
stores
Provide customers with
convenient access and
offer much lower prices
Usually characterized as
lacking skilled staff and
not providing quality
guarantees
19

20. Evaluation Model – Option Generation Perspective
From the result of competitive position assessment, there are several options by identifying
new opportunities with competitive position and market expansion objectives
20
Market
Political/
Legal
Customer/
Product
Competitor
Value Chain Channel Structure
Operating Model
Industry/Market Model
Competitive Position Assessment
CompetitivePosition
Market Expansion Objectives
WeakMediumStrong
Performance Brand-building
Outsourcing
M&A
Alliance or
Joint Venture
Direct Investment
New Business Entry OptionsCompetitive Position Assessment

21. Evaluation Model – Market Entry Perspective
Decision making framework helps to ask key question sequentially to enter market or not
21
Core competency for
creating competitive
advantage
Assessment of
market
attractiveness
Assessment of
market entry
barriers
Don’t Enter Don’t Enter Don’t Enter
Enter
Decision Making Framework for Market Entry

22. Project Methodology
22

23. Project Methodology Overview
Project will be performed in three phases: Phase I. Strategic Direction Planning, Phase II.
Strategy Development, Phase III. Implementation Plan
23
Phase I
Strategic Direction Planning
Phase II
Strategy Development
Phase III
Implementation Plan
External Analysis
Internal Analysis
Industry/Market
Political/Legal
Competitors
Customer Needs
Market Opportunity
Product/Service
Value Chain
Core Competency
Strengths/Weaknesses
Competitive Advantage
Strategic Direction
Strategic Position
Option Generation
Evaluation
Visioning
Strategy Development
Objectives
Gap Analysis
Enterprise/SBU Strategy
Roadmap
Implementation Plan
Action Items
Prioritization
Organization
Schedule
Project Methodology

24. Phase I. Strategic Direction Planning – External Analysis
For external analysis, we will use the following tools for understanding client’s business
scope and overall attractiveness
24
Key Questions
What are the market
opportunities which are
attractive to Company ABC?
What are the issues and
obstacles as regards to political
and legal perspective?
Who are the current and
potential competitors?
What are customer’s needs and
the trend of customer’s
behaviors?
Activities
Desk Research
- Press release
- Statistics
- Reports and surveys
- Analyst reports
Indepth Interview
- Industry experts
- Analysts
- Competitors
Case Study and Benchmarking
Outputs
Industry Analysis
- Industry value chain
- 5 Forces analysis
- Political/legal issue
- Industry attractiveness
matrix
Competitor Analysis
- Growth/share matrix
Market Analysis
- Market sizing

25. Phase I. Strategic Direction Planning – External Analysis
Illustrative outputs for external analysis
25
4 1.5 1.0 .5
30%
25%
20%
15%
10%
5%
A
B
C
E
F
G
D
IndustryGrowth(%)
Relative Share
.25
Growth/Share Matrix Market Size Forecasting
Top-down
Bottom-up
Consensus
Scenario
Econometric forecasting
- Correlation analysis
- multiple regression analysis
Primary market research
- Segmentation
- Survey
- Statistical analysis
Experience and assumption
from industry experts,
customers, etc
- Interview
- Survey
Multiple cases based on
statistical analysis
- Worst case, moderate case,
best case
The growth share matrix displays graphically in a 2-
by-2 matrix the position of each business of a
company’s portfolio or compares the position of
players in one industry
Illustrative

26. Phase I. Strategic Direction Planning – Internal Analysis
For internal analysis, we will use the following tools for understanding of a company and
assess Company ABC’s own performance
26
Key Questions
What is the vision and strategy
of Company ABC?
How are our products and
services delivered to customers
in terms of brand image and
quality
What is the competitive
advantage of Company ABC?
Activities
Internal Report/Data Review
- Strategy goal
- Short-term and long-term
business plan
- Financial performance
- Internal data analysis
Client Survey and Interview
- Executives survey/interview
- Working group interview
- TFT workshop
- Surveys
- Internal data and reports
Outputs
Diagnosis of Company ABC’s
Business
- Value chain analysis
- Market positioning
- Channel usage
- Customer segmentation
- Organization performance
- Core competency
- Competitive Advantage

27. Phase I. Strategic Direction Planning – Internal Analysis
Illustrative outputs for internal analysis
27
Illustrative
Aftersales
Support
LogisticsMarketing
and Sales
ManufacturingR&D
Value Chain Analysis
A Company
B Company
A value chain should show where value is being created within an industry or
company. A value chain should be compared to major competitor.

28. Phase I. Strategic Direction Planning – Strategic Direction
For strategic direction, we will derive the strategic direction based on Company ABC’s
strategic position and internal/external environment
28
Key Questions
What is the current position in
the market?
What is the target position in
the market?
What are the options in order
to reach target position?
What are the issues and
obstacles to reach target
position?
Activities
Identifying Key Issues
- Key issues derived from
external and internal analysis
- Importance of Issues
Option Generation
- Option lists
Vision Workshop
- TFT workshop
- Discussion
Outputs
Strategic Position Analysis
- Industry attractiveness
- Competitive advantage
Strategic Direction Planning
- Option Evaluation
- SWOT analysis

29. Phase I. Strategic Direction Planning – Strategic Direction
Illustrative outputs for strategic direction
29
Illustrative
Low Moderate High
Clear
Leader
Strong
Favorable
Tenable
Weak
Industry Attractiveness
Competitive
Advantage
Natural Development
Selective Development
Up or Out
Strategic Position Matrix
Natural Development Area
- Strategy for investing constantly
and maintaining competitive
advantage
Selective Development Area
- With a detailed analysis, strategy
for investing selectively or
enhancing competitive power
Up or Out Area
- Strategy for raising competitive
power to upward or withdrawing
from the market

30. Phase II. Strategy Development
For strategy development, we will define the objectives of Company ABC in the automotive
aftermarket and derive market expansion strategy
30
Key Questions
What is our measurable and
concrete objectives?
Who are target customers?
What is value proposition?
What is profit model?
How do we get to the
objectives?
Activities
Goal Setting
- Target customers
- Value proposition
- Profit model
- Assets
- Organization structure
Feasibility Study
- Industry experts interview
- Market survey
Outputs
Objectives
- Strategic goal
- Financial goal
Gap Analysis
- As-Is/To-Be gap analysis
Strategy Development
- Market expansion strategy
- Strategy roadmap

31. Phase II. Strategy Development
Illustrative outputs for strategy development
31
Illustrative
Options for Market Entry
Asset
Purchases
Acquisition
Mergers
Mergers-
of-Equals
Joint
Ventures
Strategic
Alliances
Complexity
Preserves
Autonomy
HighLow
High Pros Cons
Alliance Low risk
Low cash
investment
Easy withdrawal
Complexity
Low flexibility
Long payback
period
Merger High synergy
effect
Complex deal
structure
Hard to sale after
merger
Acquisition High
controllability
Fast decision
making
Easy gain of new
capability
Vulnerable to
regulation
Huge cash
investment
High liability
Fall in stock price

32. Phase III. Implementation Plan
For implementation plan, we will define action items and project schedule to achieve
objectives derived from strategy development phase
32
Key Questions
What are the necessary action
items to achieve market
expansion strategy?
What is the project schedule or
time table to perform market
expansion strategy?
Activities
Action Items Development
- Align with market expansion
strategy
Prioritization
- Importance evaluation of
action items
Outputs
Action Items Definition
- Objectives
- Major activity
- Schedule
- Cost and benefit
Project Schedule
- Short/long-term roadmap
- Work breakdown structure
- Gaant chart
Project Management Plan
- Monitoring plan
- Contingency plan

33. Phase III. Implementation Plan
Illustrative outputs for implementation plan
33
Illustrative
Task 1W 2W 3W 4W 5W 6W 7W 8W 9W 10W
I. Preparation
Project Setup
II. Strategic Direction Planning
External Analysis
Internal Analysis
Strategic Direction
III. Strategy Development
Goal Setting and Gap Analysis
Market Expansion Strategy
IV. Implementation Plan
Action Items Definition
Short/Long-Term Roadmap
Project Schedule

34. Project Management
34

35. Outline of Project Management
In Project Management section, the following items should be included in proposal
35
Organization
Organization Structure
- Steering Committee
- Project Task Force Team
- Advisory Board
Communication
Plan
Communication Plan
- Kick-Off Meeting
- Management Reporting
- Interim/Final Reporting
Manpower
Project Manpower
- Project Manager
- Project Leader
- Project Member
Quality Assurance
Quality Assurance Plan
- Quality of Deliverables
- Contingency Plan
Know-How
Sharing
Know-How Sharing Plan
- Education
- Training
- Workshop

36. Why Ipsos Business
Consulting
36

37. Outline of Why Ipsos Business Consulting
In Why Ipsos Business Consulting section, the following items should be included in
proposal
37
Value Proposition
Prior Experience
- Project Experience
- Thought Leader
- Global Network
Company
Introduction
Introduction
- History
- Service Line
- Financial Status
- Organization Structure
Manpower
Introduction
Role and Responsibility
- Project Experience
- Educational Background

38. End of Document
38