Analysis of demand risks for the Indian automotive sector in globally competitive environment

Abstract

PurposeThe purpose of this study is to understand the different types of risks affecting the demand for the automotive sector in India. The study is further trying to illustrate an approach for analyzing the relative intensities of these risks in the present uncertain business environment.Design/methodology/approachRisk on the overall demand is assessed by a combined Bayesian – multi-criteria decision-making approach. Data related to the different factors, affecting their product demand is collected from major automobile firms. Then, weights for these factors are evaluated by applying the analytic hierarchy process approach. Further, these weights are used in the Bayesian analysis network to evaluate the risk intensity for different subgroups, namely, political, economic, social, technological and environmental.FindingsFrom the literature and experts’ opinion, total 16 risk factors have been finalized and these are further grouped into 5 categories i.e. political, economic, social, technological and environmental. It is observed that the demand for organizations functioning in the automotive sector is more vulnerable to economic risk as compared to other risks considered in the study.Practical implicationsManagers and decision makers of associated organizations can use the proposed framework to assess the demand risks so as to pre-evaluate their demand corresponding to future changes. Factors can be added or removed and importance could be assigned to different risk factors according to the prevailing business environment for an organization or sector. This will also help the organizations to conduct a more effective risk management in an uncertain business environment.Originality/valueThe study will help in better understanding of the various demand risks prevalent in the Indian auto sector. The methodology used, provides a novel approach for assessing the macroeconomic demand risks and can be used by the firms working in the automotive sector. The proposed methodology could be used for assessing supply chain risk or any other business initiative risk. The suggested approach will help managers in devising flexible management techniques so as to mitigate the risk.