maruti

“ Our Policy is to be present in most of the segments, but our focus will be small car.

This country for a good number of years will be a small car market because five million two-wheelers are sold and only six lakh cars.

You have got 35-40 million two-wheelers on the

road”

“ Our Policy is to be present in most of the segments, but our focus will be small car.

This country for a good number of years will be a small car market because five million two-wheelers are sold and only six lakh cars.

You have got 35-40 million two-wheelers on the

road”

• Maruti Udyog a joint venture between Suzuki of Japan (26% stake) and the Indian government in 1981

• 10 basic model and more than 50 variants

• 3 out of top five selling car model in India are Maruti Product (M 800, Zen, Alto)

• Annual production capacity 5,00,000 with 54% market share

Road to Maruti 800

• Indian govt. preferred * Japan for technology & capabilities in small car

* Suzuki over top three player in japan Toyota,Nissan,Honda

• Govt. Offered various concession for the production for M 800 so was priced attractively

• First M800 in 1983 with INR 40,000 tagged as ` people car` from Gurgaon

• Dominated the market with 85% small car share upto 1990

Disputes and price paid

• In 1992 Suzuki increased its equity to 50%

• 1993 conflict occured when Suzuki proposed an expansion plan of Rs. 22 billion which government denied accusing of inflating the Project cost

• Transfer of gear box technolgy was held and finaly govt agreed

• 1990 dispute over management control and Bhargava`s sucessor* Suzuki decided to go to International court of arbitration

* As a mutal concern Bhaskarudu steeped down two years before and Mr. Khattar appointed in 2000

Realized the profile of Indian car market have changed

B segment was growing faster than small car segment (M 800)

Leaving the basic 800 model unchanged for over 15 years was a blunder

Decided to make up for the loss time with :- * Launching new models every 6-12 month * Operational efficiency & marketing effectiveness ) (i) Product Development (ii) Vendor Management (iii) Manufacturing * Brand Building * Diversification

BRINGING

GLORY

BACK

• Dispute delayed the introduction of new models• Lossed the commanding market share from 85% to 65%

• Global players started to enter India with deeper pockets * 1998 compétions from Hundai (Santro) * 1998 – Matiz fom Daewoo motors * 1999 – Indica from Tata motors

• All these models began to offer stiff competition to Maruti

Cont…..

The Launch Story

• 1999 – two new models launched * Boleno for premium segment * Wagon R as multi utility vechile

• 2000 – Alto (Premium small car) especially for export market * two versions Alto LX and Alto VX * two versions in seven colours * exported to more than 12 countries * Highest selling small car in Netherland 2001- Launched Versa, the first multipurpose vechile

The Launch StoryModel Price Range ( in Rs.) No. of Variants

Maruti 800 Rs. (.2mn - .23mn) 3

Maruti Omni Rs. (.22mn - .26mn) 5

Maruti Alto Rs. (.29mn - .37mn) 6

Zen Rs. (.33mn - .48mn) 12

Gypsy Rs. (.45mn - .47mn) 4

WagonR Rs. (.32mn - .46mn) 9

Versa Rs. (.4mn - .49mn) 6

Maruti esteem Rs (.47mn - .61mn) 14

Baleno Rs (.65mn - .70mn) 4

Maruti Grand Vitara Above Rs. (1mn) -

Product Development

• Product development is a capital intensive process• Have to introduce new models to face competition

• Maruti reduced the cost on new models: * In-house development * sourcing of dies, welding jigs and other eqipment * introducing flexible welding lines that could be used for multiple models * reduced the number of platforms – shared the same engine & critical components (M 800 & Alto Lx) (Alto VX & Wagon R ) * Standardized the engine

• Discontinued Maruti 1000 and Gypsy 1000

Vendor Management

• Implemented Vendor rating for timely feedback to vendors

• Cross functional team set up to solve quality problems

• Web initiaives helped Maruti to bring down procurement time and cost

• Reduced the number of suppliers from 370 to 299 in 2003

• Instead of assembling component from many suppliers,started picking from Tier-1 suppliers, who assemble supplies from another

* Better co-ordination,smaller inventories, lower costs

Cont…

• Maruti paid its vendor within 7 days of receipt of materials

• Encouarged the vendors to build warehouse near Gurgaon

• System to tell its vendor cmponents requirement within 15 days

• Connected its vendor through Internet information system

• E-buying in consumables cut procurement cost

• Maruti Started 4 four related business * Corporate lease and fleet management (2001)

* Buying and selling of used cars(2001) * Auto Finance (2002) * Car Insurance (2002)

Corporate lease and fleet managementIn this business there were 4 key partners – Fiancer,dealer,insurer,

car rental agency.Brand management,business development,maintenance,risk

undertaking and fleet management operations were responsibility of Maruti

Fiancer- Conducted initial credit assessmant, provided funding, took residual risk and responsible for collection

Dealer- maintained the car and provided other value added services such as valets and emergency assistance

Insurer- Value risk undertakingCar Rental Agency- provided replacement cars if & when necessary

Buying and Selling Used Car

• Used car addressed the need of two segments

* Two-wheeler vehicle owner aspiring to own a car * Existing car owners who want to upgrade their cars

• Used car market in India was 1.3 times the size of market of new cars• Used car market was a unorganised sector, resulting poor realiability &

transperecy• Maruti entered this business with 12 `True Value` outlets in 11 cities

• Maruti Played an advisory role in conducting technical evaluation, estimating the refurbishment cost and providing certification and warranty to the buyer of the pre-ownwed car

• The warranty was covered by an arrangemant with insurance companies

Auto finance

Auto Finance (2002) • In past Auto finance was through direct selling agents of independent

finance companies

• Maruti made available fiance through deales & product of eight selected finance companies

• Maruti earned sourcing fees from the finance companies

• In 2003;agreement lith SBI, * India`s largest bank * SBI became preferred fiancier for customers * Compétitive interest rates * SBI extensive branch network

Car Insurance

• Maruti`s two subsidiarités – Maruti Insurance Brokera Ltd and Maruti Insurance Distribution services Ltd. Entered into alliance with insurance companies

• Dealers got payements on insurance claims directly from insurance companies

• Customers benifitted with caseless transation

• Maruti earned sourcing fees from the insurance companies.

PEST Analysis

Political

Maruti ltd. Acquired by Indian Govt.

Govt provide various concessions for Maruti 800

In may 2002 cabinet committee of disinvestment approve the exit of Gvot

from joint venture

Economical

Suzuki holding rose to 54.2%

Early 2003 Maruti made an IPO

Entry of new players in the Indian market

Cont…

Social 6.8 mln population annual income is >12 lakh Changing consumer preference Changing life style in urban India

Technological

Transfer of technologies from Suzuki Japan to India

Development of new models in India rather than import from outside

Automation of manufacturing assembly

Rapid change in environmental standard e.g. Bharat I,II,III

Strengths• Established distribution and after-sales networks

• Understanding of the Indian market and ability to liaison with the government

• Ability to design products with differentiating features

• Brand Image

• Experience and Know-how in technology

Weaknesses• Lack of experience with the foreign market

• Inexperience with foreign workforce

• Heavy Import tariffs

SWOT ANALYSIS OF MARUTI UDYOG

Opportunities• Increased purchasing power of Indian middleclass category

• Govt. subsidies

• Tax benefits

• Foreign collaboration

Threats• Emerging competition

• Increasing cost of inputs

• Rapid change in customer prefrence

SWOT ANALYSIS OF MARUTI UDYOG

Threat of new Entrance : Increasing

• Most of the global players are attracted toward Indian market

• Welcoming government policies

Power of supplier : low

• Large number of automobile component suppliers

• Bulk buyer can bargain high

Porter five force model

Power of buyer : Increasing

• Increasing awareness among the consumer

• High expectation

Threat of substitute : Low to medium

• Consumer could shift to hybrid and electric cars

Industry Rivalry : High

• New player are entering in market

• Competition in selected segments are very high e.g. small and mid car segment

Porter five force model

Differentiation• Performance

• Mileage

• Best match with Indian rode conditions

• Less Maintenance cost

• Resale price

• After sale services

Porter’s Generic Strategy

Market Leader• Large market share in small car segment

• Largest distribution channel

• Most Dominant player in Indian car market

As a leader strategy of Maruti Suzuki• Market Expansion

Targeting two wheeler segment

Targeting new geographical areas like Europe, South America, Africa

Market Position of Maruti Suzuki

Protection of existing market share• Consistent product and process development

• Strong distribution network and service station

• Heavy promotional budget

• Unique poisoning for each segment

Market Position of Maruti Suzuki

• Maruti Driving School

• Adoption of state running it is

• Advertisement through electronic media, Print Media, outdoor ads and

web media

• CSR programs

• Sponsorship of Rode race e.g. Maruti Raid De Himalaya

• Sponsorship of other sports like golf and polo

Promotional strategy

• Maruti Suzuki should do proper quality check before launching new

model e.g. recall of A-star

• Maruti Suzuki have to need launch new model in MUV and SUB

segment

• Company have to need tight cost control for competing TATA and

Hyundai in A car segment

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