Maruti Suziki

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MARUTI UDYOG LIMITED Maruti Udyog Limited, a subsidiary of Suzuki Motor Corporation of Japan, has been the leader of the Indian car market for about two decades. Its manufacturing plant, located some 25 km south of NewDelhi in Gurgaon, has an installed capacity of 3,50,000 units perannum, with a capability to produce about half a millionvehicles.The company has a portfolio of 11 brands, includingMaruti 800 ,Omni, premium small car Zen, international brands Alto andWagonR, off-roader Gypsy, mid size Esteem, luxury car Baleno, theMPV, Versa, Swift and Luxury SUV Grand Vitara XL7.In recent years, Maruti has made major strides towards its goal ofbecoming Suzuki MotorCorporation's R and D hub for Asia. It hasintroduced upgraded versions of WagonR, Zen and Esteem,completely designed and styled in-house.Maruti's contribution as the engine of growthofthe Indian autoindustry, indeed its impact on the lifestyle and psyche of an entiregeneration of Indian middle class, is widely acknowledged. Itsemotional connect with the customer continuesMaruti tops customer satisfaction again for sixth year in a rowaccording to the J.D. Power Asia Pacific 2005 India CustomerSatisfaction Index (CSI) Study.The company has also ranked highest in India Sales SatisfactionStudy.The company's quality systems and\practices have been rated as a"benchmark for the automotive industry world-wide" by A VBelgium, global auditors for International Organisation for\Standardisation. In keeping with its leadership position, Marutisupports safe driving and traffic management through mass media messages and a state-of-the art driving training and researchinstitute that it manages for the Delhi Government.The 1

TAXILA BUSINESS SCHOOL company's service businesses including sale and purchase of preowned cars (TrueValue), lease and fleet management service forcorporates (N2N), Maruti Insurance and Maruti Finance are nowfully operational.. These initiatives, besides providing total mobility When it comes to Indian auto industry, the first brand that comes to Indian customer mind is Maruthi. In our paper we are attempting to identify the future of Maruthi Udyog Ltd which is currently the market leader. The main questions we will be addressing are, •

Can it sustain its market share

•

Will their be a decline in profits

•

What can it do to keep its growth rate?

• How can it compete in the highly competitive small car segment •

What are its strategic alternatives

We will analyze the competitors briefly concentrating more on TATA motors, one of the fast growing Indian auto manufacturer.Maruti Suzuki India Limited is a publicly listed automaker in India. It is a leading four-wheeler automobile manufacturer in South Asia. Suzuki Motor Corporation of Japan holds a majority stake in the company. It was the first company in India to mass-produce and sell more than a million cars. It is largely credited for having brought in an automobile revolution to India. It is the market leader in India. On 17 September 2007, Maruti Udyog was renamed to Maruti Suzuki India Limited. The company's headquarters remain in Gurgaon, near Delhi.

Industry scenario 2

TAXILA BUSINESS SCHOOL The Indian Car Industry The Indian car industry can be classified on the basis of price, into lower end small car or economy segment, higher end of the economy segment (Rs0.25-0.45mn) mid-size segment (Rs0.450.8mn), luxury/premium car segment (above Rs0.8mn). The lower end of the economy segment includes cars like Maruti 800, Maruti Omni and Premier Padmini. The higher end will include models like Maruti Zen, Matiz, Hyundai Santro and Telco Indica. The midsized segment currently includes models like Ford Ikon, Hyundai Accent, Maruti Esteem, Cielo and Honda City. The luxury segment of the car market includes such models as Mitsubishi Lancer and Mercedes E220. The demand for passenger cars can be segmented on the basis of the user segment as taxi operators, government, non-government institutions, and individual buyers. A major portion of the demand in India accrues mainly from personal vehicle owners. Lately, the Indian car market has seen a lot of action with a number of new entrants wanting a share of the pie. With individual incomes on the rise and finance being easily available, aspirations have also grown to include a car among a family’s prized possessions. With the Indian buyer still being price conscious, all these factors have contributed to the rising sales graph in the small car market.

The multi-utility vehicle (MUV) is used in transporting smaller loads over medium and small distances, providing low fixed and operating costs in comparison to LCVs. It can be used for transporting both goods and passengers. Apart from these it can be converted into an ambulance, a minivan, a pickup van or leisure vehicle. The MUV per se is a rugged vehicle. The high steel 3

TAXILA BUSINESS SCHOOL body, tough parts and brave interiors make it amenable to rough handling. The high ground clearance and high power delivery make it suitable for driving over rough terrain places, hilly regions, deserts etc. Till the early nineties, the Government of India was the largest MUV buyer and continues to be the single largest segment. It is used in police, paramilitary, defense, Public and Works Department (PWD), public sector organizations etc The boom of 2004 can be surpassed in 2005 if the government introduces VAT and lowers excise.Indian auto industry is experiencing huge shifts in trends. The industry is developing at a fast rate. The roar you hear is of the automobile industry opening the throttle.A growth of 19 per cent in sales of all vehicles combined isnoteworthy; more so the 41 per cent rise in sales of commercialvehicles. It is not surprising then that the annual convention of theSociety of Indian Automobile Manufacturers (SIAM) on Thursday sawcompanies unveiling grand investment plans.Investments totaling Rs 25,000 crore are planned by biggies such asMaruti Udyog, Tata Motors, Honda-SIEL and TVS Motor, put together.Many of these plans are already underway and part of the investmentshave been made. And the buoyant mood is unmistakeable.What's interesting is that Honda Motor and Toyota are closer than everbefore in their plans to enter the small-car market, which appears set to witness explosive growth. At least four new small-cars are likelyto enter the market in the next couple of years from Maruti, Hyundai,General Motors, and Tata Motors, which is working on a platform toreplace the Indica. And, of course, there is the muchawaited Rs1-lakh car from Tata Motors.

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LEADING PLAYERS AND SEGMENTS IN WHICH THEY OPERATE

Manufacturer Ashok Leyland Asian Motor Works Atul Auto Bajaj Auto BMW India Daimler Chrysler India Eicher Motors Electrotherm India Electric Fiat India Force Motors Ford India General Motors India Hero Honda Motors Hindustan Motors Honda Hyundai Kinetic Motor Mahindra & Mahindra Majestic Auto Maruti Suzuki Piaggio Reva Electric Car Co. Royal Enfield Motors Scooters India Skoda Auto India Suzuki Motorcycles Swaraj Mazda Ltd. Tata Motors Tatra Vectra Motors Toyota Kirloskar TVS Motor Co. Volvo India Yamaha Motor India

Segments LCVs, M&HCVs, Buses M&HCVs Three wheelers Two and Three Wheelers Cars and MUVs Cars LCVs, M&HCVs, Buses Two Wheelers Cars Three Wheelers, MUVs and LCVs Cars and MUVs Cars & MUVs Two Wheelers Cars, MUVs and LCVs Two Wheelers, Cars and MUVs Motors Cars and MUVs Two Wheelers Three Wheelers, Cars, MUVs, LCVs Three Wheelers Cars, MUVs Three Wheelers, LCVs Electric Cars Two Wheelers Three Wheelers Cars Two Wheelers LCVs, M&HCVSs, Buses Cars, MUVs, LCVs, M&HCVs, Buses M&HCVs Cars, MUVs Two Wheelers M&HCVs, Buses Two Wheelers

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Global scenario Car industry is one of the largest industries in the world, there are many players in world manufacturing cars, among those are (a) General motors, Ford in USA (b) Daimler Chrysler, Fiat, Lexus, Volkswagen, Renault, etc. in Europe (c) Toyota, Nissan, Honda, Hyundai and Suzuki, etc. in Asia. Global market for cars forecast to increase by 3.8% to 50.7 m units in 2007 - an increase of almost 1.9 m units. Biggest contribution has to come from developing Asia (excludes Japan) and the growth of that region, especially China. Contribution of the Pacific Rim countries to the growing world market is, by 2009, almost an additional five million units. Indian scenario The PAL entered the Indian market in mid 90 with Premier car, then Maruti started capturing the Indian market with help of maruti 800 .The car industry in general has grown at a CAGR of 13.5% p.a over the last 5 years, presently, India is 11th largest passenger car market in the world and is expected to be the 7th largest market by 2016. The Car industry has emerged as a key contributor to the Indian economy; currently India has low car 6

TAXILA BUSINESS SCHOOL penetration with 3 cars in 1000 individuals. India is the fourthlargest car market in Asia. Passenger cars come in great variety, starting from 2-seater electric car REVA to 5-seater compact cars like Zen, Santro, Indica, etc. They come in all ranges– economical and luxurious. The production, sales, export figures of Indian car industry (units/annum) of last 5 yrs are given in Annexure 1 and sales, export figures ( revenue wise) and growth trend for last 5 yrs are given in Annexure 2. Market information The current market scenario is given below: ➢

Passenger car sales grew by 10.84% and crossed the 1 million mark in 2006-07 and record sales of 1,076,408 vehicles.

➢

Utility vehicles sales grew by almost 12.2% in April-May 2007 compared to the same period last year. Various manufacturers have entered this category and this segment is expected to grow at 20% by 2010.

Product categorization Categor Engine

Length

Market

Price

Exampl

y

(mm)

share

range

e

<3350

% 19

(lacs) 2-3

Reva,80

3-5

0 Alto,

Mini

(cc) < 800

Small

800-

3350-

car

1200

3800

56

zen 7

TAXILA BUSINESS SCHOOL Mid

1100-

3800-

segment 1800 Executiv 1700-

4400 4300-

e Luxury

4850 4500-

2400 >2400

20

5-10

Ikon,

3

10-20

accent Accord

2

>20

Bmw

5100

5series

Market Drivers in India ➢ Increase in disposable incomes. ➢ Rise in aspiration levels. ➢ Lowering interest rates. ➢ Wide variety and easy availability of financing options. ➢ High sensitivity to fuel prices. ➢ Lack of urban & rural public transportation infrastructure ➢ Flourishing service sector ➢ Growing working population ➢ Fast paced urbanization to rise from 28% to 40% by 2020 ➢ Middle class expanding by 30 - 40 million every year Key Trends ➢ Market evolution from Mini cars to Hatchbacks to Compact Sedans now evident. ➢ Increase in customer emphasis on aesthetics and comfort. ➢ Shrinking product life-cycles. Government Policies and regulations 8

TAXILA BUSINESS SCHOOL ➢

In 2002, the Indian government formulated an auto policythat aimed at

promoting integrated, phased, enduring and self-

sustained growth of the Indian automotive industry ➢

Allows automatic approval for foreign equity investment upto 100% in the automotive sector and does not lay down any minimum investment criteria.

➢

Lays emphasis on R & D activities carried out by companies in India.

➢ Weighted tax deduction of upto 150% for in-house research and R & D activities ➢

India is expected to align its crash requirements and emission standards with European standards in the 2008 / 09 timeframe.

➢ Presently Bharat Stage III ( Equivalent to Euro III) is mandated in Metros and other large cities and Bharat Stage II ( Equivalent to Euro II) for the rest of the country. Bharat Stage IV ( equivalent to Euro IV) is expected to be introduced in the large Indian metros around 2009 and Bharat Stage III in the rest of the country

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Key players and their market share Key players

Sales From AprilNovembe r 05-06 2,91,182

Total Total Market number of Share (in exports in %) April 0506 52.2 23,043

1,07, 066

19.2

68,374

24,348

16.6

12,105

24,348

4.4

31

10,512

1.9

9,928

31536

5.7

-

.

and others

10

TAXILA BUSINESS SCHOOL Ford India Pvt. Ltd 2% Honda Siel cars India Ltd. 4%

others 6%

Maruti Udyog

Tata Motors 17%

Hyundai Motors India Ltd. Maruti Udyog 52%

Tata Motors Honda Siel cars India Ltd. Ford India Pvt. Ltd others

Hyundai Motors India Ltd. 19%

Three growth drivers Driving these ambitious plans are three major factors. First, thereduction in excise duty on small-cars, effected in the last Budget,which has clearly given a leg-up to sales in that category. Theconcession extended to small-cars has been the catalyst for Honda andToyota to take a serious look at the options available to them in thesmall-car market.Second, the Free Trade Agreement India signed withThailand two yearsago. As per the agreement, the so-called 82 early harvest items, whichinclude a range of auto components, will be subject to zero duty whenimported from Thailand into India from September 1. Both Toyota andHonda have major operations in Thailand and the FTA will help themintegrate their Thai operations into their India plans. The option ofimporting critical components from their own operations/suppliers inThailand confers a twin advantage for the Japanese majors.

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TAXILA BUSINESS SCHOOL First, thetime to market can be crashed as they do not have to wait for Indiancomponent suppliers to invest in production capacities and, second, itconfers a big price advantage as they can import dutyfree.And the final factor is that India is now reckoned as a lowcostglobal manufacturing base for small cars; Hyundai has already takenthe lead in this respect. The Korean company's Indian unit is a major exporter of cars. Exports accounted for 39 per cent of total sales in2005-06 and the stated plan is to take this to 50 per cent once thecompany's second plant goes on stream in the next couple of years. Maruti is developing a new small-car model for introduction in 2008both in India and abroad. Besides, its global alliance with Nissan isalso set to produce another small-car meant for the global market andthe proposed new plant in India will produce this model for sale inIndia and abroad. Commercial vehicles Meanwhile, the commercial vehicle (CV) segment is also passing throughsome exciting times and some realignment of forces appears likely. TheCV industry is showing signs of evolving on the global pattern ofprime movers consisting of large, multi-axle trucks between cities andsmall, one-tonne trucks for intra-city movement. Even as the Ace fromTata Motors catalysed this partly, sales of multi-axle, heavy trucksis showing a rising trend. Clearly, the automotive industry is on the cusp of a long, sustainedgrowth cycle and the dips, when they happen, may not be as damaging tothe major players as in the past thanks to their 12

TAXILA BUSINESS SCHOOL growing internationaloperations. Domestic economic cycles of boom and bust will be less ofa bother as these companies increase their revenues from internationaloperations. Whether it is Tata Motors, Mahindra & Mahindra, and TVS Motoror Bajaj Auto (to name just a few), all the major players are nowestablishing a strong multinational presence across product segments. HISTORY OF THE COMPANY Maruti Udyog Limited (MUL) was established in February 1981, though the actual production commenced in 1983. Through 2004, Maruti has produced over 5 Million vehicles. Marutis are sold in India and various several other countries, depending upon export orders. Cars similar to Marutis (but not manufactured by Maruti Udyog) are sold by Suzuki in Pakistan and other South Asian countries.

Around 1970, Sanjay Gandhi, political advisor and younger son to the then Prime Minister of India, Indira Gandhi, envisioned the manufacture of an indigenous, cost-effective, low maintenance compact car for the Indian middle-class. Indira Gandhi's cabinet passed a unanimous resolution for the development and production of a "People's Car". Sanjay Gandhi's company was christened Maruti Limited. The name of the car was chosen as "Maruti", after a Hindu deity named Marut. At that time Hindustan Motors' Ambassador was the chief car, and the company had come out with a new entrant, the Premier Padmini which was slowly gaining a part of the market share dominated by the Ambassador. For the next ten years, the Indian

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TAXILA BUSINESS SCHOOL car market had stagnated at a volume of 30,000 to 40,000 cars for the decade ending 1983. Sanjay Gandhi was awarded the exclusive contract and licence to design, develop and manufacture the "People's Car". This exclusive rights of production generated some criticism in certain quarters, which was directly targeted at Indira Gandhi. Over the next few years, the company was sidelined due to the Bangladesh Liberation War and emergency. In the early days under the powerful patronage of Sanjay Gandhi, the company was provided with free land, tax breaks and funds. Till the end of 1970s, the company had not started the production and a prototype test model was met with criticism and skepticism. The company went into liquidation in 1977. The media perceived it to be another area of growing corruption. [4] Unfortunately, Maruti started to fly only after the death of Sanjay Gandhi, when Suzuki Motors joined the Government of India as a joint venture partner with 50% share.[5] . After his death, Indira Gandhi decided that the project should not be allowed to die. Maruti entered into this collaboration with Suzuki Motors, The collaboration heralded a revolution in the Indian car industry by producing the Maruti 800. The car went on sale on December 14, 1983. It created a record by taking 13 months time to go from design to rolling out cars from a production line. By the year 1993 the company had sold up to 1,96,820 cars, mostly by selling its chief product the Maruti 800s. By March 1994, it produced one million vehicles, becoming the first Indian company to cross this milestone. It reached the two million mark in October, 1997 and rolled out its 4 millionth vehicle, an Alto-LX, on April 19, 2003. 14

TAXILA BUSINESS SCHOOL Suzuki Motor Company was chosen from seven prospective partnersworldwide. This was due not only to their undisputed leadership insmall cars but also to their commitment to actively bring to MULcontemporary technology and Japanese management practices(which had catapulted Japan over USA to the status of the top automanufacturing country in the world).A licence and a Joint Venture agreement was signed between Govt ofIndia and Suzuki Motor Company (now Suzuki Motor Corporationof Japan) in Oct 1982. MUL launched its first car Maruti800 ondecember 14,1983 at initial price of Rs.47,500. Recent history YEAR EVENTS 2006 -Indian car market leader Maruti Udyog on Feb 28, announced a price cut ranging between Rs 13,000-22,000 across five models, including M800 and Alto, following the cut in excise duty on small cars -MUL unveils new WagonR in Punjab

AWARD AND ACCOLADES 2005

· Number one in JD Power SSI for the second consecutive year. · Number one in JD Power CSI for the sixth time in a row - the only car to win it so many times. · M800, WagonR and Swift topped their segments in the TNS TotalCustomer Satisfaction Study Leadership in the JD Power InitialQuality Study - Alto number one in its segment for the 2nd time ina row, Esteem number one in its segment for the 3rd year in a row,Swift number one in the premium compact segment. · WagonR and Esteem top their segments in the JD Power APEALstudy. 15

TAXILA BUSINESS SCHOOL · TNS ranks Maruti 4th in the Corporate Reputation Strength (CSR)study (#1 in Auto sector)-Feb 05.

· Maruti bagged the "Manufacturer of the year" award from Autocar-CNBC (2nd time in a row)-Feb 05. · First Indian car manufacturer to reach 5 million vehicles sales. · Business World ranks Maruti respectedcompanies in India-Oct 04.

among

top

five

most

· Maruti ranked among top ten (Rank7) greenest companies in Indiaby Business Today - Sep '04 2004 · Maruti Suzuki was No. 1 in Customer satisfaction, No. 1 in SalesSatisfaction No.1 in Product Quality (Esteem and Alto) and No. 1in Product Appeal (Esteem and Wagon R). · No. 1 in Total Customer Satisfaction (Maruti 800, Zen and Alto). · Business World ranked us among the country's five most respectedcompanies. · Business World ranked us the country's most respected automobilecompany. · Voted Manufacturer of the year by CNBC. · Voted one of India's Greenest Companies by Business Today-AC Nielson ORG-MARG. Structure

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TAXILA BUSINESS SCHOOL Ownership MUL India's leading automobile manufacturers and the market leader in the car segment, both in terms of volume of vehicles sold and revenue earned is a public sector initiative. 18.28% of the company is owned by the Indian government, and 54.2% by Suzuki of Japan. The Indian government held an Initial Public Offering of 25% of the company in June of 2003.

Ownership

others

Government

IPO

Govern ment Suzuki IPO others

Suzuki

Main divisions(brand equity) The major services offered are, Sales of Automobiles Authorized Service Stations • Maruti is one of the companies in India which has unparalleled service network. To ensure the vehicles sold by them are serviced properly Maruti had 1545 listed Authorized service stations and 30 Express Service Stations 17

TAXILA BUSINESS SCHOOL on 30 highways across India. Service is a major revenue generator of the company. Most of the service stations are managed on franchise basis, where Maruti trains the local staff. Other automobile companies have not been able to match this benchmark set by Maruti. The Express Service stations help many stranded vehicles on the highways by sending across their repair man to the vehicle. Maruti Insurance • Launched in 2002 Maruti provides vehicle insurance to its customers with the help of the National Insurance Company, Bajaj Allianz, New India Assurance and Royal Sundaram. The service was set up the company with the inception of two subsidiaries Maruti Insurance Distributors Services Pvt. Ltd and Maruti Insurance Brokers Pvt. Limited. This service started as a benefit or value addition to customers and was able to ramp up easily. By December 2005 they were able to sell more than two million insurance policies since its inception. Maruti Finance •

To promote its bottom line growth, Maruti launched Maruti Finance in January 2002. Prior to the start of this service Maruti had started two joint ventures Citicorp Maruti and Maruti Countrywide with Citi Group and GE Countrywide respectively to assist its client in securing loan. Maruti tied up with ABN Amro Bank, HDFC Bank, ICICI Limited, Kotak Mahindra, Standard Chartered Bank, and Sundaram to start this venture including its strategic parnters in car finance. Again the company entered into a strategic partnership with SBI in March 2003. Since March 2003, Maruti has sold over 12,000 vehicles through SBI-Maruti Finance. SBI-Maruti Finance is currently available in 166 cities across

18

TAXILA BUSINESS SCHOOL Maruti TrueValue • Maruti True Value is a service offered by Maruti Udyog to its customers. It is a market place for used Maruti Vehicles. one can Buy, Sell or Exchange used Maruti Vehicles with the help of this service in India. N2N Fleet Management • N2N is the short form of End to End Fleet Management and provides lease and fleet management solution to corporates. Its impressive list of clients who have signed up of this service include Gas Authority of India Ltd, DuPont, Reckitt Benckiser, Sona Steering, Doordarshan, Singer India, National Stock Exchange and Transworld. This fleet management service include end-to-end solutions across the vehicle's life, which includes Leasing, Maintenance, Convenience services and Remarketing.

Maruti Driving School • As part of its corporate social responsibility Maruti Udyog launched the Maruti Driving School in Delhi. Later the services were extended to other citites of India as well. These schools are modelled on international standards, where learners go through classroom and practical sessions. Many international practices like road behaviour and attitudes are also taught in these schools. Before driving actual vehicles participants are trained on simulators.

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Key personnel Initially R.C.Bhargava, was the managing director of the company since the inception of the joint venture. Till today he is regarded as instrumental for the success of Maruti Udyog. Joining in 1982 he held several key positions in the company before heading the company as Managing Director. Currently he is on the Board of Directors. After completing his five year tenure, Mr. Bhargava later assumed the office of Part-Time Chairman. The Government nominated Mr. S.S.L.N. Bhaskarudu as the Manging Director on August 27, 1997. Mr. Bhaskarudu had joined Maruti in 1983 after spending 21 years in the Public sector undertaking Bharat Heavy Electricals Limited as General Manager. Later in 1987 he was promoted as Chief General Manager, 1998 as Director, Productions and Projects, 1989 Director, Materials and in 1993 as Joint Managing Director.

Production Milestones ➢ 1st vehicle produced, December 1983 ➢ 1,00,000 vehicles produced by August, 1986 ➢ 5,00,000 vehicles produced by June, 1990 ➢ 10,00,000 vehicles produced by March, 1994 ➢ 15,00,000 vehicles produced by April, 1996 ➢ 20,00,000 vehicles produced by October, 1997

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TAXILA BUSINESS SCHOOL ➢ 25,00,000 vehicles produced by March, 1999 ➢ 30,00,000 vehicles produced by June, 2000 ➢ 35,00,000 vehicles produced by December 2001 ➢ 40,00,000 vehicles produced by April, 2003 ➢ 45,00,000 vehicles produced by April, 2007-2008

OTHER PRODUCTS OF MARUTI SUZUKI Maruti • Maruti 800 STD BS III • Maruti 800 AC BS III Omni • 5 seater Maruti Omni • 8 seater Maruti Omni • LPG Maruti Omni Maruti Alto • Alto • Alto Lx • Alto Lxi Maruti Zen • Maruti Zen Lx • Maruti Zen Lxi • Maruti Zen Vxi Wagon R • WagonR Lx • WagonR Lxi 21

TAXILA BUSINESS SCHOOL • WagonR Vxi • WagonR Ax

Versa • 5 seater • 8 seater ( DX & DX2) Maruti Esteem • Maruti Esteem Lx • Maruti Esteem Lxi • Maruti Esteem Vxi Baleno • Baleno Sedan VXi • Baleno Sedan Lxi

Brands and models Till recently whenever we think of Maruthi we think of it as 800 due to the huge sales it achieved. It was like a symbol of luxury for the middle class. Nowsituations are changing and people are looking at Maruthi stable for the wide range of products they are offering. The various models and brands that are sold by Maruthi in the order of their launch are, • Maruti 800: Launched 1983. India’s largest selling car till 2004. •

Maruti Omni: Launched 1984.

•

Maruti Gypsy: Launched 1985.

•

Maruti 1000: Launched 1990

22

TAXILA BUSINESS SCHOOL • Maruti Zen: Launched 1993.Modified 2003.Production to be halted 2006New generation Zen (First generation MR Wagon in Japan) to be introduced 2006 •

Maruti Esteem: Launched 1994

•

Maruti Wagon- R: Launched 1999 Modified 2006

•

Maruti Baleno : Launched 1999

• Maruti Alto: Launched 2000. Currently the largest selling car in India •

Maruti Grand Vitara: Launched 2003

•

Maruti Grand Vitara XL-7

•

Maruti Versa: Launched 2004

•

Maruti Swift: Launched 2005

BRAND PORTFOLIO OF THE COMPANY CLASS City Car

BRAND NAME

YEAR INTRODUCED

Maruti 800

1983

Maruti Alto

2000

Maruti Zen Estilo

2005

Suzuki star)

Alto

(A- 2008

23

SLOGAN Change your life Let's go Shape your world Stop @ nothing

TAXILA BUSINESS SCHOOL

Super mini Car Compact Car

Sports Utility Vehicle

Suzuki Splash

Upcoming model in 2009

Maruti Wagon-R

1999

For the race

Maruti Swift

2005

You're the fuel

Maruti Suzuki SX4

2007

Men are back

Maruti DZiRE

2008

The heart car

Suzuki Vitara

2007

Suzuki

Grand

smarter

Play it your way King

Maruti Gypsy

1985

Maruti Omni

1984

Fits all

Maruti Versa

2003

The joy of travelling together

Microvan

BRAND HIERARCHY OF THE COMPANY

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TAXILA BUSINESS SCHOOL Bundle of competencies Technology Maruthi always introduces the best technology into its product line, in addition to all its features which are almost standard in most cars. They introduced 16* 4 Hypertech engines across the entire Maruti Suzuki range. These are 4 valve engines powered by 16 bit chip. This gives an ideal combination of power and performance. They also introduced electronic power steering system (EPS) which gives better maneuverability. Their latest introduction Swift has all the technology like surround protection (SSP). This includes ABS, dual front airbags, collapsible steering column, crashworthy structure etc. They also has additional features like brake force distribution, key less entry system. The six microprocessors are connected in a high speed canbus. This controls engine, EBS, EPS, Auto AC, Security and dead lock and air bag. Automatic climate control, rally based suspension system and above all the dynamic design is what the latest entrant offers its customers. Maruti also uses latest in IT for its operations. It uses the oracle based packages for CRM and employee feed back. Maruti also uses oracles ERP packages for its operations. ATFCAN and Maruti are collaborating on Canadian CNG conversion technology.

Design and development Maruti Suzuki is outsourcing its design and development activities to India. They are looking towards India as their design hub. Among the company's product development challenges, the need for shorter cycle times is always at the top. Management wants to be able to launch new models faster and reduce the time required 25

TAXILA BUSINESS SCHOOL for minor changes and development of product variants. Another challenge is co-development. Maruti's goal is to collaborate closely with its global teams and suppliers on the development of new platforms and product freshening. Other challenges include streamlining the process of vehicle localization and enhancing quality and reliability.

These challenges pointed directly to a product lifecycle management (PLM) solution with capabilities for information management, process management, knowledge capture and support for global collaboration; a PLM solution directly addressing Maruti's business challenges. For example, PLM's information management capabilities address the issue of the many platforms, local variants and export destinations. Process management permits concurrent development and faster change management and provides a platform for other process improvements - for faster vehicle development. Knowledge capture increases innovation and also reduces costs by increasing part re-use. PLM's collaboration capabilities permit global development by ensuring fast and accurate dissemination of product information. For this Maruti uses one of the leading PLM software package by UGS. At Maruti, styling is a cross-discipline function that requires designers, engineers and model makers to pool their resources in a multitude of activities that have to be performed in order to transform creative ideas into finished products. These stylingrelated activities include storyboarding, conceptualizing, rendering, tape drawing, model making, feasibility analysis, CAD data generation and Class-A surfacing. In addition, Maruti designs 26

TAXILA BUSINESS SCHOOL new accessories and adds value to its products’ interiors and exteriors by designing/developing fabrics, colors and graphics. Some of the most recent examples of Maruti styling are seen in change programs for the Zen, Wagon R and Esteem product lines. Other Maruti styling efforts are in various stages of development. Maruti used to employ a variety of software for its styling programs, including SCAD (Suzuki CAD), Alias, Unigraphics and Catia. However, today Maruti’s styling and engineering functions are doing almost all their work in UGS’ NX solutions.

Manufacturing Markets Maruti has a strong domestic market presence in India. It has a market share of 47% in the domestic market. The current market share of Indian car industry is given below, Maruti Exports Limited is the subsidary of Maruti Udyog Limited with its major focus on exports and it does not operate in the domestic Indian market. The first commercial consignments of 480 cars were sent to Hungary. By sending a consignment of 571 cars to the same country Maruti crossed the benchmark of 3, 00,000 cars. Since its inception export was one of the aspects government was keen to encourage. Angola, Benin, Djibouti, Ethiopia, Europe, Kenya, Morocco, Sri Lanka, Uganda, Chile, Costa Rica and El Salvador are some of the markets served by Maruti Exports. 27

TAXILA BUSINESS SCHOOL

23% 46%

MUL Hyundai Tata

17%

Others 14%

Maruti also has markets in other countries depending on export demand. Suzuki is selling cars similar to Maruti in Pakistan and South Asian countries. They have a major non European market which grew 78% in 05- 06. Loss of sales in Europe is due to stoppage of Alto which accounted for 80% of their exports and introduction of Swift. Algeria has emerged as Maruti's largest overseas market with sales growing from a few hundred in FY02 to over 6,500 (FY06). The company says it may cross 9,800 this year. Maruti is quite bullish on markets like, Chile, Morocco, Egypt and Sudan apart from the neighbouring countries. The auto major expects its exports to Chile and Morocco to go above 5,900 and 2,300, respectively, this year. Its volumes from there have moved from under 700 in FY02 to 3,115 (FY06) and exports to Sudan was nil two years back. "In Egypt, our numbers are estimated to grow to over 2,000 and 2,700 this year," according to Mr Khattar. In FY07 it was under 200 few years back. Meanwhile, Maruti is also reporting a high on current year exports to the neighboring countries is on a high too. The company 28

TAXILA BUSINESS SCHOOL expects to export 9,200 units to Sri Lanka this year, a growth of over 50%, 1,200 units to Nepal, over 1,175 to Bhutan and 700 to Bangladesh. Maruti, which saw exports dip by 29% last fiscal, also plans to launch a new export model during '08-09 , which will target the European market. The company targets to export 1, 00,000 units of the model annually. Overall passenger car market registered 24.86% growth Sales of compact cars jumped by 31.2% Mid-size car segment grew slower at 14.7%. The Government's small car policy seems to be yielding results, with the share of compact cars increasing to 68.25 per cent in the April-July 2006 period compared with 64.9 per cent in the same period last year. Not surprisingly, compact cars emerged as the main driver of passenger car growth in the period. While the overall passenger car market increased by 24.86 per cent to 3,24,671 units, sales of compact cars jumped by 31.2 per cent to 2,21,598 units in the April-July 2006 period. In fact, all the three major carmakers (Maruti Udyog, Hyundai Motor, and Tata Motors) saw a sizeable jump in their compact car sales in the period.

Customer segmentation and value proposition 29

TAXILA BUSINESS SCHOOL Segmentation Under Rs. 3 Lakhs

• Maruti 800, Alto, Omni • Reva

Rs. 3-5 Lakhs

• • • • •

Rs. Lakhs

5-10

Rs. Lakhs

10-15

Rs. Lakh

15-30

Ambassador Fiat Palio Hyundai Santro, Getz Chevrolet Opel Corsa Maruti Zen, Wagon R, Versa, Esteem, Gypsy • Ford Icon & Fiesta • Tata Indica, Indigo • Mahindra Bolero • • • • • • • •

Chevrolet Swing, Optra, Tavera Hyundai Accent, Elantra Mahindra Scorpio Maruti Baleno Toyota Corolla, Innova Tata Safari Mitsubishi Lancer, Lancer Cedia Honda City

• • • •

Ford Mondeo & Endeavour Chevrolet Forester Skoda Octavia Classic & Combi Honda Civic & CR-V

• Maruti Suzuki Grand Vitara • Hyundai Sonata Embera, Terracan Tucson • Mitsubishi Pajero • Audi A4 • Opel Vectra • Honda Accord 30

&

TAXILA BUSINESS SCHOOL • Mercedes C Class • Toyota Camry

Rs. Lakhs

30-90

Above Rs. 1 Crore

• Audi A6, A8 & TT • BMW X5, 5 Series & 7 Series • Mercedes E Class, S Class, SLK, SL & CLSClass • Porsche Boxster, Cayenne, 911 Carrera & Cayman S • Toyota Prado • Bentley Arnage, Continental GT & Flying Spur • Rolls Royce Phantom • Maybach

Targeting Maruti was introduced targeting the middle class. Maruti’s positioning was as a value for customer product. Its target segments are well depicted in its Product Pyramid profit model. In product pyramid model the distinct customer segments were identified and targeted based on a variety of factors. These factors among many include, style, color, price preference, features etc. The base of the pyramid is occupied by low price, high volume products like 800 where margins are slim. The apex of the pyramid is occupied by high priced, low volume products like Baleno. Although profits were concentrated near the top, base played a crucial role as it acted as a barrier to entry for the competitors and also insulated the profitable area near the top. Partnerships 31

TAXILA BUSINESS SCHOOL Pressure started mounting on Indira Gandhi and Sanjay Gandhi to share the details of the progress on the Maruti Project after its kickoff. Since country's resources were made available by mother to her son's pet project. A delegation of Indian technocrats was assigned to hunt a collaborator for the project. Initial rounds of discussion were held with the giants of the automobile industry in Japan including Toyota, Nissan and Honda. Suzuki Motor Corporation was at that time a small player in the four wheeler automobile sector and had major share in the two wheeler segment. Suzuki's bid was considered negligible. In in the initial rounds of discussion the giants had their bosses present and in the later rounds related to the technical discussions executives of these automobile giants were present. Osamu Suzuki, Chairman and CEO of the company ensured that he was present in all the rounds of discussion. Osamu in an article writes that it subtly massaged their (Indian delegation) egos and also convinced them about the sincerity of Suzuki's bid. In the initial days Suzuki took all steps to ensure the government about its sincerity on the project. Suzuki in return received a lot of help from the government in such matters as import clearances for manufacturing equipment (against the wishes of the Indian machine tool industry then and its own socialistic ideology), land purchase at government prices for setting up the factory Gurgaon and reduced or removal of excise tariffs. This helped Suzuki conscientiously nurse Maruti through its infancy to become one of its flagship ventures. Relationship between the Government of India, under the United Front (India) coalition and Suzuki Motor Corporation over the joint venture was a point of heated debate in the Indian media till 32

TAXILA BUSINESS SCHOOL Suzuki Motor Corporation gained the controlling stake. This highly profitable joint venture that had a near monopolistic trade in the Indian automobile market and the nature of the partnership built up till then was the reason for all the issues. The success of the joint venture led Suzuki to increase its equity from 26% to 40% in 1987 and further to 50% in 1992. In 1982 both the venture partners had entered into an agreement to nominate their candidate for the post of Managing Director and every Managing Director will have tenure of five years. PRODUCT LINE • • • • • • • • • • •

Maruti 800-change your life-Around Rs.2lacs ALTO-Let’s Go-Rs.23000-Rs.290000 Omni-Fits All-Rs. 235000-248000 Zen- look at it-Rs.320000-385000 WagonR- for the smarter race-Rs.340000-460000 Versa-the joy of traveling together-Rs.360000-460000 Swift-you’re the fuel-Rs.405000-508000 Esteem-welcome to the big world-Rs. 450000-510000 Gypsy King-Rs.550000-528000 Baleno-Owner’s choice-Rs.570000-652000 Suzuki’s Grand Vitara-SUV- Rs.16-18lacs

DEALER AND SUPPLIER NETWORK Mul’s Supply Chain MUL’s inputs primarily comprise raw materials and purchased components. Only a small amount of raw material and components consumed are imported and a much larger portion is purchased from the sources within India. Raw Material Suppliers The raw materials used in the manufacturing process primarily comprise steel coils and paints. In recent years, MUL is increasingly trying to localize the purchases of steel coils with a 33

TAXILA BUSINESS SCHOOL view to reduce cost. Earlier MUL used to follow the tender system for the purchase of steel. Under this system, specifications were advertised and accept the lowest price offered by a supplier who could meet the specifications. In 2001 MUL moved to the quotation system which gives them the flexibility to renegotiate the prices once an offer is submitted. Standard purchase orders are issued covering a period of six months for purchase of steel from foreign suppliers for Indian supplier the period extends up to one year. …… At MUL the role of the vendors has gradually evolved from tactical to strategically where the vendors work in close coordination with MUL to meet our long-term goals in terms of: • component development; • quality; • delivery; and • Cost control. In order to improve quality and generate economies of scale, MUL has reduced the number of vendors of components in India from 370 as of March 31, 2000 to about 100 as in 2005. In case of repair and replacements, costs of defective components supplied are borne by the vendor.24 Delivery by Vendors MUL has a delivery instruction system that provides details of the component requirements for every 15 days, across the different variants of the various models, to the vendors. Vendors are linked to the MUL through the Internet-based information network, which maintains online information regarding order status and delivery instructions. These has helped in reducing both inventory levels and lead times required for the supply of various components and sub-assemblies, and enable the vendors to more efficiently plan and dispatch their products. Vendors located within a radius of 100 kilometers from the manufacturing facility supply the majority of the components. This has enabled the vendors to eliminate packaging and supply components directly to the assembly line. 34

TAXILA BUSINESS SCHOOL Reduction of Vendor Costs In some of the major vendors MUL has implemented the MPS, which focuses on the elimination of wasteful activities in their manufacturing processes. Vendors are helped in areas such as improving their productivity, reducing the number of their components that are rejected, reducing materials handling, improving their yield from materials, and reducing their inventories. This helps reduce their costs of production, and also reduces the costs of the components required. In addition the work is going on to integrate the vendors into the worldwide purchase system, or WWP, whereby a vendor may become the sole supplier for a Suzuki product in several countries including India. This would generate economies of scale for the vendor that will also result in the reduction of the costs. Vendor Quality Control Quality management system such as ISO 9000/ QS 9000 forms the basis for producing a quality product. To assist small and medium vendors in achieving ISO 9000 certification, in 1995 MUL adopted a cluster approach wherein vendors are grouped together, are trained in quality management and are assisted in obtaining ISO 9000 certification. This cluster approach was extended to helping vendors attain QS 9000 certification. Periodic vendor quality system audits are conduct in order to ensure that quality standards are sustained. Imported components Imported components are mainly purchase from Suzuki Sales network Dealers: MUL has the largest network of dealers amongst car manufacturers in India. As of March 31, 2003, dealers had employed more than 3,500 sales executives. Sales network is linked with the MUL through the secure extranet-based information network. The sales of spares, accessories and Automobile-related services such as insurance and finance serve as additional sources of revenue for the dealers. The availability 35

TAXILA BUSINESS SCHOOL of these related products and services at sales outlets also helps to attract customers to the outlets and promotes sales of the cars. Agreements with our dealers MUL dealers provide services to customers such as pre-delivery inspection of vehicles, sales of cars, after sales service, supply of spare parts and other services that promote sales of cars within the territory for which they are appointed. Dealers are required to maintain their outlets in accordance with the specifications and employ well-trained sales staff. Agreements with the dealers are usually of five years. These agreements are generally renewable for successive terms of three years, by mutual agreement. Enhancing dealer performance: The performance of the dealers is followed and improvements are suggested frequently. In order to assist the dealers in enhancing their performance and capabilities, MUL has introduced a concept of “Balanced Scorecard”. Using this tool, the performance of a dealership in several areas of operations, including sales, service, spares and accessories, financial management and management systems is measured. Dealers who perform well on the “Balanced Scorecard” are reward with a cash payment at the end of the fiscal year. The “Balanced Scorecard” serves as an effective incentive for dealers to enhance their performance. After-sales Service Network There are more than 400 Maruti dealer workshops and more than 1,500 Maruti Authorized Service Stations, or MASSs, covering more than 900 cities in India. In addition, 24-hour mobile service is also offered under thebrand “Maruti On-road Service”. As a benchmark for dealers with respect to service quality and infrastructure facilities, MUL has launched service stations under the brand “Maruti Service Masters, or MSMs. MUL also has service 36

TAXILA BUSINESS SCHOOL stations on highways in India under the brand “Express Service Stations”. To promote sales of spare parts and the availability of high quality, reliable spare parts for its products, spares are sold under the brand name “Maruti Genuine Parts”, or MGP. These are distributed through the dealer network and through the authorized sellers of the spare parts. Many of the MASSs are at remote locations where MUL do not have dealers. In order to increase the penetration, in terms of sales volumes, of its products in these remote areas, some of the MASSs are integrate into the sales process in order to increase sales of the cars and related products and services such as spares and accessories, insurance and financing distrubution Manufacturing and distribution of cars is a process of creation and delivery of superior quality of vehicles to its customers at an affordable price. The very nature of the business demands high degree of collaboration and coordination. The success of car manufacturing business depends not only on the effective management of its production processes, but also intelligent management of supply, distribution and service chains. Maruti has been very efficient in managing the supply, distribution and servicing chains. Maruti's dealer network is the largest for tiny car manufacturer in India. Over the years Maruti has build a very strong dealership and service network consisting of 260 showrooms and 277 dealer workshops, besides 1329 Maruti Authorized Service Stations covering 656 cities. Maruti's vehicles are now available in Australia, Europe and America. Maruti has a very strong supplier network. It has established chain of dedicated suppliers near to its production base, which gives them unique cost and delivery time advantages. Maruti has implemented "Just in Time" (JIT) supply for some of its major suppliers, Maruti's large production capacity offers scale 37

TAXILA BUSINESS SCHOOL economics in procurement, production and distribution. The high volume of production has provided Maruti unique bargaining power over its suppliers. Finally, Maruti has trained and skilled workforce for rapid improvement in quality and enjoys supplier's credibility in the industry. It has earned the reputation of delivering quality vehicles, services and value for money. A) TURNAROUND STRATEGIES MARUTI FOLLOWED Maruti was the undisputed leader in the automobile utility-car segment sector, controlling about 84% of the market till 1998. With increasing competition from local players like Telco, Hindustan Motors, Mahindra & Mahindra and foreign players like Daewoo, PAL, Toyota, Ford, Mitsubishi, GM, the whole auto industry structure in India has changed in the last seven years and resulted in the declining profits and market share for Maruti. At the same time the Indian government permitted foreign car producers to invest in the automobile sector and hold majority stakes. In the wake of its diminishing profits and loss of market share, Maruti initiated strategic responses to cope with India’s liberalization process and began to redesign itself to face competition in the Indian market. Consultancy firms such as AT Kearney & McKinsey, together with an internationally reputed OD consultant, Dr. Athreya, have been consulted on modes of strategy and organization development during the redesign process. The redesign process saw Maruti complete a Rs. 4000 mn expansion project which increased the total production capacity to over 3,70,000 vehicles per annum. Maruti executed a plan to launch new models for different segments of the market. In its redesign plan, Maruti, launches a new model every year, reduce production costs by achieving 85-90% indigenization for new models, revamp marketing by increasing the dealer network from 150 to 300 and focus on bulk institutional sales, bring down number of vendors and introduce competitive bidding. Together with the redesign plan, there 38

TAXILA BUSINESS SCHOOL has been a shift in business focus of Maruti. When Maruti commanded the largest market share, business focus was to “sell what we produce”. The earlier focus of the whole organization was "production, production and production" but now the focus has shifted to "marketing and customer focus". This can be observed from the changes in mission statement of the organization: 1984: "Fuel efficient vehicle with latest technology". 1987: "Leader in domestic market and be among global players in the overseas market". 1997: "Creating customer delight and shareholders wealth". Focus on customer care has become a key element for Maruti. Increasing Maruti service stations with the scope of one Maruti service station every 25 km on a highway. To increase its market share, Maruti launched new car models, concentrated on marketing and institutional sales. Institutional sales, which currently contributes to 7-8% of Maruti’s total sales. Cost reduction and increasing operating efficiency were another redesign variable. Cost reduction is being achieved by reaching an indigenization level of 85-90 percent for all the models. This would save foreign currency and also stabilize prices that fluctuate with exchange rates. However, change in the mindset was not as fast as required by the market. Maruti planned to reduce costs, increase productivity, quality and upgrade its technology (Euro I&II, MPFI). In addition, it followed a high volume production of about 400,000 vehicles / year, which entailed a smooth relationship between the workers and the managers.

Post 1999, the market structure changed drastically. Just before this change, Maruti had wasted two crucial years (1996-1998) due to governmental interventions and negotiation with Suzuki of Japan about the break-up of the share 39

TAXILA BUSINESS SCHOOL holding pattern of the company. There was a change in leadership, Mr. Sato of Suzuki became the Chairman in June 1998, and the new Mr.J. Khatter was appointed as the new Joint MD. Khatter was a believer in consensus decision making and participative style of management.As a result of the internal turmoil and the changes in the external environment, Maruti faced a depleting market share, reducing profits, and increase in inventory levels, which it had not faced in the last 18 years. After their fall in market share they redesigned their strategies and through their parent company Suzuki they learned a lot.The organizational learning of Maruti was moderately successful, the cost was relatively inexpensive as Maruti had its strong Japanese practices to fall back upon. With the program of organizational redesign, rationalization of cost and enhanced productivity, Maruti bounced back to competition with 50.8% market share and 40% rise in profit for the FY20022003 Current strategies of maruti suziki I.

PRICING STRATEGY - CATERING TO ALL SEGMENTS

Maruti caters to all segment and has a product offering at all price points. It has a car priced at Rs.1,87,000.00 which is the lowest offer on road. Maruti gets 70% business from repeat buyers who earlier had owned a Maruti car. Their pricing strategy is to provide an option to every customer looking for up gradation in his car. Their sole motive of having so many product offering is to be in the consideration set of every passenger car customer in India. Here is how every price point is covered.

Sl.N o. 1

BRAND

VARIANTS

PRICE IN DELHI (Rs.)

GRAND VITARA

XL7

16,97,000.00 40

TAXILA BUSINESS SCHOOL 2

3

4 5

6

7

8

9

MARUTI BALENO

Lxi

5,72,000.00

MARUTI ESTEEM

Vxi LX

6,42,000.00 4,66,000.00

MARUTI VERSA

VX DX

5,39,000.00 4,19,000.00

MARUTI SWIFT

DX2 Lxi

4,58,000.00 3,95,000.00

Vxi Zxi MARUTI WAGON- LX R

4,05,000.00 4,85,000.00 3,35,000.00

Lxi AX Vxi VXi ABS ST

3,62,000.00 4,63,000.00 3,87,000.00 4,20,000.00 5,06,000.00

HT

5,29,000.00

MARUTI ZEN

D

3,58,000.00

MARUTI OMNI

LX Lxi Vxi CARGO

3,41,000.00 3,68,000.00 3,93,000.00 2,05,000.00

MARUTI GYPSY

41

TAXILA BUSINESS SCHOOL

10

MARUTI ALTO MARUTI ALTO

11

MARUTI 800

CARGO LPG 5 SEATER 8 SEATER XL 5 SEATER XL 8 SEATER STANDARD

1,83,000.00 2,27,000.00 2,21,000.00 2,19,000.00 2,31,000.00 2,38,000.00

LX Lxi STD. MPFI A/C MPFI

2,74,000.00 2,94,000.00 2,14,000.00 2,37,000.00

Sundaram to bring this service for its customers. From identifying the most suitable car coverage to virtually hassle-free claim assistance it's your dealer who takes care of everything. Maruti Insurance is a hassle-free way for customers to have their cars repaired and claims processed at any Maruti dealer workshop in India. True Value – Initiative to capture used car market Another significant development is MUL's entry into the used car market in 2001, allowing customers to bring their vehicle to a 'Maruti True Value' outlet and exchange it for a new car, by paying the difference. They are offered loyalty discounts in return.This helps them retain the customer. With Maruti True Value customer has a trusted name to entrust in a highly unorganized market and where cheating is rampant and the biggest concern in biggest driver of sale is trust. Maruti knows its strength in Indian market and has filled this gap of providing trust in Indian used car market. Maruti has created a system where dealers pick up used cars, recondition them, give them a fresh warranty, and sell them again. All investments for True Value are made by dealers. Maruti has build up a strong network of 172 42

TAXILA BUSINESS SCHOOL showrooms across the nation. The used car market has a huge potential in India. The used car market in developed markets was 2-3 times as large as the new car market. III. REPOSITIONING OF MARUTI PRODUCTS Whenever a brand has grown old or its sales start dipping Maruti makes some facelifts in the models. Other changes have been made from time to time based on market responses or consumer feedbacks or the competitor moves. Here are the certain changes observed in different models of Maruti. Omni has been given a major facelift in terms of interiors and exteriors two months back. A new variant called Omni Cargo, which has been positioned as a vehicle for transporting cargo and meant for small traders. It has received a very good response from market. A variant with LPG is receiving a very good response from customers who look for low cost of running. Versa prices have been slashed and right now the lowest variant starts at 3.3 lacs. They decreased the engine power from 1600cc to 1300cc and modified it again considering consumers perception. This was a result of intensive survey done all across the nation regarding the consumer perception of Versa. Esteem has gone through three facelifts. A new look last year has helped boost up the waning sales of Esteem. Baleno was launched in 1999 at 7.2 lacs. In 2002 they slashed prices to 6.4 lacs. In 2003 they launched a lower variant as Baleno LXi at 5.46 lacs. This was to reduce the price and attract customers.

43

TAXILA BUSINESS SCHOOL Wagon-R was perceived as dull boxy car when it was launched. This made it a big failure on launch. Then further modifications in engine to increase performance and a facelift in the form of sporty looking grills on the roof. Now it’s of the most successful models in Maruti stable. Zen has been modified four times till date. They had come up with a limited period variant called Zen Classic. That was limited period offer to boost short term sales. Maruti 800 has so far been facelifted two times. Once it came with MPFi technology and other time it came up with changes in front grill, head light, rear lights and with round curves all around. IV. CUSTOMER CENTRIC APPROACH Maruti’s customer centricity is very much exemplified by the five times consecutive wins at J D Power CSI Awards. Focus on customer satisfaction is what Maruti lives with. Maruti has successfully shed off the public- sector laid back attitude image and has inculcated the customer-friendly approach in its organization culture. The customer centric attitude is imbibed in its employees. Maruti dealers and employees are answerable to even a single customer complain. There are instances of cancellation of dealerships based on customer feedback. Maruti has taken a number of initiatives to serve customer well. They have even changed their showroom layout so that customer has to walk minimum in the showroom and there are norms for service times and delivery of vehicles. The Dealer Sales Executive, who is the first interaction medium with the Maruti customer when the customer walks in Maruti showroom, is trained on greeting etiquettes. Maruti has proper customer complain handling cell under the CRM department. The Maruti call 44

TAXILA BUSINESS SCHOOL center is another effort which brings Maruti closer to its customer. Their Market Research department remains on its toes to study the changing consumer behaviour and market needs.Maruti enjoys seventy percent repeat buyers which further bolsters their claim of being customer friendly. Maruti is investing a lot of money and effort in building customer loyalty programmes. V. COMMITTED TO MOTORIZING INDIA Maruti is committed to motorizing India. Maruti is right now working towards making things simple for Indian consumers to upgrade from two-wheelers to the car. Towards this end, Maruti partnerships with State Bank of India and its Associate Banks took organized finance to small towns to enable people to buy Maruti cars. Rs. 2599 scheme was one of the outcomes of this effort. Maruti expects the compact cars, which currently constitute around 80% of the market, to be the engine of growth in the future. Robust economic growth, favorable regulatory framework, affordable finance and improvements in infrastructure favor growth of the passenger vehicles segment. The low penetration levels at 7 per thousand and rising income levels will augur well for the auto industry. Maruti is busy fine-tuning another innovation. While researching they found that rural people had strange notions about a car that the EMI (equated monthly instalments) would range between Rs 4,000 and Rs 5,000. That, plus another Rs 1,500-2,000 for monthly maintenance, another Rs 1,000 for fuel (would be the cost of using the car). To counter that apprehension, the company is working on a novel idea. Control over the fuel bill is in the consumer's hands. But, maintenance need not be. Says Khattar: "What the company is doing now is saying how much you spend 45

TAXILA BUSINESS SCHOOL on fuel is in your hands anyway. As far as the maintenance cost is concerned, if you want it that way, we will charge a little extra in the EMI and offer free maintenance." VI. DISINVESTMENT AND IPO OF MARUTI UDYOG LIMITED It was a long and tough journey, but a rewarding one at the end. A reward worth Rs 2,424 crore, making it the biggest privatization in India till date. The size of Maruti’s sell- off deal is proof of its success. On the investment of Rs 66 crore it made in 1982, when Maruti Udyog Limited (MUL) was formally set up, the sale represents a staggering return of 35 times The best part of the deal is the Rs 1,000 crore control premium the Government has been able to extract from Suzuki Motor Corporation for relinquishing its hold over India’s largest car company. Now looking at the strategy point of it – for Suzuki, of course, complete control of MUL means a lot. Maruti is its most profitable and the largest car company outside Japan. Suzuki will now be in the driver’s seat and will not have to mind the whims and fancies of ministers and bureaucrats. “Decisions will now become quicker. The response to changing market conditions and technological needs will be faster,” says Jagdish Khattar, managing director, MUL. After the disinvestment Suzuki became the decision maker at MUL. They flowed fund in India for the major revamp in MUL. Quoting from the report that appeared in The Economic Times, 4th April 2005, The Indian car giant Maruti Udyog Limited has finalized its two mega investment plans — a new car plant and an engine and transmission manufacturing plant. Both the projects will be implemented by two different companies. At its meeting the company's board approved a total investment of Rs3,271.9 crore 46

TAXILA BUSINESS SCHOOL for these two ventures, which will be located in Haryana. The above signifies when GOI was a major stakeholder in the MUL strategies which lead to investment have had a bureaucracy factor in it but after the disinvestment strategy followed is a TOP DOWN approach with a fast implementation. Suzuki's proposed two-wheeler facility in India, would start making motorcycles and scooters by the end of 2005 through a joint venture, in which Maruti has 51 per cent stake. The twowheeler unit will have a capacity of 250,000 units a year. The disinvestment followed by IPO gives the insight in the fact that now all the strategic decisions are taken by Maruti Suzuki Corporation. Disinvestment had helped by removing the red tape and bureaucracy factor from its strategic decision making process.

VII. REALISATION OF IMPORTANCE MAINTENANCE SERVICES MARKET

OF

VEHICLE

In the old days, the company's operations could be boiled down to a simple three-box flowchart. Components came from the 'vendors' to the 'factory' where they were assembled and then sent out to the 'dealers'. In this scheme, you know where the company's revenues come from. The new scheme is more complicated. It revolves around the total lifetime value of a car. Work on this began in 1999, when a MUL team, wondering about new revenue streams, traveled across the world. Says R.S. Kalsi, general manager (new business), MUL: "While car companies 47

TAXILA BUSINESS SCHOOL were moving from products to services, trying to capture more of the total lifetime value of a car, MUL was just making and selling cars." If a buyer spends Rs 100 on a car during its entire life, onethird of that is spent on its purchase. Another third went into fuel. And the final third went into maintenance. Earlier, Maruti was getting only the first one-third of the overall stream. As the Indian market matured, customers began to change cars faster. Says Kalsi: "So the question was, if a car is going to see three users in, say, a life span of 10 years, how can I make sure that it comes back to me each time it changes hands ? So Maruti has changed gears to take a big share of this final one-third spent on maintenance. Maintenance market has a huge market potential. Even after having fifty lakh vehicles on road Maruti is only catering to approximately 20000 vehicles through its service stations everyday. For this they are conducting free service workshops to encourage consumers to come to their service stations. Maruti has increased its authorized service stations to 1567 across 1036 cities. Every regional office is having a separate services and maintenance department which look after the growth of this revenue stream.

VIII. PLAYING ON COST LEADERSHIP Maruti is the price dictator in Indian automobile industry. It’s the low cost provider of car. The lowest car on road is from Maruti 48

TAXILA BUSINESS SCHOOL stable i.e. Maruti 800. Maruti achieves this through continuous improvements in operational efficiency and productivity. The company has set itself (and its vendors) the target of a 50% improvement in productivity and a 30% reduction in costs in three years. The ability to keep lowering the prices sets Maruti apart from other players in the league. Maruti spread the overheads over a larger base. The impressive sales and profits were the result of major efforts within the company. Maruti also increased focus on vendor management. Maruti consolidated its vendor base. This has provided its vendors with higher volumes and higher efficiencies. Maruti does that by working with vendors, assuring them that for every drop in price, volumes will go up. Maruti is now encouraging its vendors to develop R&D capability for specialized components. Based upon such activities, product competitiveness in the market will further increase. Maruti also made strides in applying IT to manufacturing. A new Vehicle Tracking System improved efficiency on the shop floor and enhanced quality control. The e Nagare system, adopted from Suzuki Motor Corporation, smoothened Maruti’s Just In Time operations.

C) MAJOR FUTURE STRATEGIES

I. PHASING OUT ZEN IN 2007 The launch of Swift and phasing out Zen is a strategic move. Alto was launched keeping in mind that it will take over Maruti 800 49

TAXILA BUSINESS SCHOOL market in future. Perhaps being the flagship product phasing out of Maruti 800 faced lots of resistance from dealers all over. Another reason behind not phasing out Maruti 800 was the fear of brand shift of customers to other competitor’s product. Swift was launched in May, 2005 in the price band starting from 4 lacs. Before launch of Swift Maruti management had decided that they will phase out Zen since it had already came up with two modifications. The major reason behind this decision was cannibalization of Wagon R and Swift due to overlapping of price band. It is a rational decision to kill a product before it starts facing the decline stage in product cycle. Maruti is offering Rs. 3000.00 more margins to dealer on the sale of Wagon-R as compared to Zen. This is to let dealer push Wagon R instead of Zen. II. MARUTI PLANS FOR A BIG DIESEL FORAY The new car manufacturing company, called Maruti Suzuki Automobiles India Limited, will be a joint venture between Maruti Udyog and Suzuki Motor Corporation holding a 70 per cent and 30 per cent stake respectively. The Rs1,524.2 crore plant will have a capacity to roll out 1 lakh cars per year with a capacity to scale up to 2.5 lakh units per annum. The new car manufacturing plant will begin commercial production by the end of 2006. Maruti would set up a diesel engine plant at Gurgaon in line with its plan to become a major player in diesel vehicles in a couple of years. This has been done in the wake of major competition from Tata Indica and meets the growing demand of diesel cars in India. While the annual growth in the diesel segment was 13 per cent in the last three years, it was 19-20 per cent in the first quarter (April-June) of the current fiscal. Maruti has currently an 50

TAXILA BUSINESS SCHOOL insignificant presence in diesel vehicle. It will manufacture new generation CRDI (common rail direct injection) engines in collaboration with Fiat-GM Opel and engines will be of 1200 cc. The plant with a capacity to produce one lakh diesel engines would be operational in 2006. At present, Peugeot of France, supplies diesel engines for Maruti's Zen and mid-sized Esteem models. This will further reduce the imported component in Maruti vehicles, making them more competitive in the Indian market.

III. MARUTI PLANS TRANSMISSION PLANT

FOR

A

NEW

ENGINE

AND

The engine and the transmission plant will be owned by Suzuki Powertrain India Limited in which Suzuki Motor Corporation would hold 51 per cent stake and Maruti Udyog holding the balance. The ultimate total plant capacity would be three lakh diesel engines. However, the initial production would be 1 lakh diesel engines, 20,000 petrol engines and 1.4 lakh transmission assemblies. Investment in this facility will be Rs.1,747.7 crore. The commercial production will start by the end of 2006. IV. INDIA AS EXPORT HUB FOR MARUTI Three years back as an experiment, based on the increasing design capabilities of suppliers in countries like India, McKinsey did an exercise to figure out just how much money could be saved if automobiles were to be made in overseas locations like India, Mexico and South Africa -- an automobile BPO, so to speak. The result was staggering: the industry stands to gain $ 150 billion annually in cost savings, and an additional $ 170 billion 51

TAXILA BUSINESS SCHOOL annually in new revenues once demand shoots up following the drop in prices, and the combination of which means a 25 per cent increase in existing revenue levels. According to the study, over 90 per cent of automobiles today are sold in the countries they are made in, so there's a lot of money to be made by shifting the production overseas. Till recently, just 100,000 cars produced in low-cost countries were exported to high-cost ones -- presumably this figure is going up now that Altos from Maruti, Santros from Hyundai, Indicas from Tata Motors, and Ikons from Ford, among others, are being regularly exported out of India. Yet, as McKinsey points out, since it just costs $ 500 and just three weeks (and both figures are falling) to ship out a car to anywhere in the world, why produce cars in high-wage islands? If a car was produced in India instead of in Japan, the study says, it will cost 22-23 per cent less, after factoring in higher import duties for components/steel, lower levels of automation, and transport costs. In August, 2003 Maruti crossed a milestone of exporting 300,000 vehicles since its first export in 1986. Europe is the largest destination of Maruti’s exports and coincidentally after the first commercial shipment of 480 units to Hungary in 1987, the 300,00 mark was crossed by the shipment of 571 units to the same country. The top ten destination of the cumulative exports have been Netherlands, Italy, Germany, Chile, U.K., Hungary, Nepal, Greece, France and Poland in that order. The Alto, which meets the Euro-3 norms, has been very popular in Europe where a landmark 200,000 vehicle were exported till 52

TAXILA BUSINESS SCHOOL March 2003. Even in the highly developed and competitive markets of Netherlands, UK, Germany, France and Italy Maruti vehicles have made a mark. Though the main market for the Maruti vehicles is Europe, where it is selling over 70% of its exported quantity, it is exporting in over 70 countries. Maruti has entered some unconventional markets like Angola, Benin, Djibouti, Ethiopia, Morocco, Uganda, Chile, Costa Rica and El Salvador. The Middle-East region has also opened up and is showing good potential for growth. Some markets in this region where Maruti is, are Saudi Arabia, Kuwait, Bahrain, Qatar and UAE.

The markets outside of Europe that have large quantities, in the current year, are Algeria, Saudi Arabia, Srilanka and Bangladesh. Maruti exported more than 51,000 vehicles in 2003-04 which was 59% higher than last year. In the financial year 2003-04 Maruti exports contributed to more than 10% of total Maruti sales.

53

TAXILA BUSINESS SCHOOL V. MARUTI EMERGING AS R&D HUB FOR SUZUKI MOTOR CORPORATION Japanese auto major Suzuki is all set to convert Maruti Udyog Ltd’s research and development (R&D) facility as its Asia hub by 2007 for the design and development of new compact cars, according to a top official of the firm. The country’s leading car manufacturer will make substantial investments to upgrade its research and development centre at Gurgaon in Haryana for executing design and development projects for Suzuki. This includes localisation, modernisation and greater use of composite technologies in upcoming models. The company will be hiring more software engineers and technocrats to handle Suzuki’s R&D projects. Investment would be more in terms of manpower than in infrastructure, which is already in place. Apart from working on innovative features, the R&D teams will focus on latest technologies using CAD-CAM tools to roll out new models that will meet the needs of MUL’s diverse customers in the future. The reasons as to why it can be good for R&D is that ➢ Firstly the cost involved in R&D and infrastructure is low in India as compared to other countries. Also the technical skills are abundantly available; again at a cheaper cost. ➢ Secondly, India is growing as an export hub along with the Indian market growing aggressively into becoming an attractive one for investors. Thirdly, Suzuki’s investment in India, is also important as it has completely divested now as a result MUL will now become a 100% subsidiary of Suzuki in the coming year

Advertising of maruti 54

TAXILA BUSINESS SCHOOL

Impact of Advertising for Product Presentation • Creates awareness • Provides Information • Generates Association with the audience • Helps in creating an image • Reaches large audience • Develops brand preference • Competitive weapon Advertising moves consumers being unaware of a product or service to finally purchasing it. Advertising Strategy • Start advertising 2 weeks before launch • Advertise on all major media TV : 10 Sec – Rs. 3,50,000 (Match) 30 sec – Rs. 10 to 12 lakh (Prime Time) Magazine : Double page - Rs. 4,03,500 Full Page – Rs. 2,02,500 Newspaper : Rs. 75,50,000 Hoardings : Rs. 1,10,000 per month Radio : 10 sec – Rs. 5,000 • Sponsor cricket matches • Promotion at malls • Launch around a month before festivals like Diwali or Navratri So it was yesterday when I saw this new advertising campaign or Marketing Campaign of Maruti Suzuki. What followed was a bit of discussion about the 55

TAXILA BUSINESS SCHOOL

AdvertisingCommercialamongus. Now, let me first describe the ad as it went through. It was an Advertising Commercial for the most successful car brand in India - Maruti Suzuki. It shows a typical large gathering of a family most probably for a family function. The main characters are a mom, an infant kid, around 45 months old and some other relatives. The Advertising Commercial goes as follows: The mom is busy with some work, and the infant kid is somewhere away from her, so that she can see her from a distance, but since she is busy with the work, she is unable to attend to her. The Advertising Commercial starts with showing the mom busy with work and the baby starts crying. So, the mom signals another relative (a lady) to attend the kid. Unfortunately, the kid continues to cry. The lady then passes on the kid to the kid's father (from the gestures between the kid's mom and the male person in the ad, it is apparent that he is the kid's father), but no success. The cycle continues and the kid is passed on from one person or relative to the other (uncle, aunty, grandfather, grandma, etc.) They all try all methods including scolding, singing, etc., but the kid doesnt get quite. At last the kid reaches the mom and there he is happily playing again. The message for the Advertising Commercial comes up on screen: Always take your Maruti Car to the MarutiAuthorizedServiceNetwork.The ad message is clear- Maruti wants all its customers to utilize the services of its own dealer and service networks, instead of the customers going to other brand services or going toa roadsideun-brandedgarage. Now 56

TAXILA BUSINESS SCHOOL personally, my first impression after watching this Advertising Campaign was It is a Good Advertising Commercial. However, immediately came a reply from other person - kya bakwas commercial hai?. Before we get into the details, let's observe some good and bad points of this AdvertisingCommercialGood: - The theme chosen is realistic - Indian Family, Function, everyone is busy, everyone trying a hand to pacify the kid. So the ad does generate a lot of interest - The timeline of ad is perfect - Nobody has been focussed for a longer time. It straightaway gets to the main point - to pacify the kid - There is a variety of methods included - someone dancing, singing, making faces, toys and even scolding - it all looks perfect - Finally, when the kid reaches the mom, he is happy - everyone wonders what's happening, and there comes the Advertising Commercial Punchline conveying themessage. Before we get into the bad part, Just wanted to mention the reaction of others who saw the ad with me. We have a 5 months old baby at my home, and many family members keep him busy and happy, so it was a real life scenario for us. Moreover, mom & dad leave the kid at home in others care, if they have to go out, and the kid stays happily - something contrary to what was shown in the Advertising Commercial. What other members differed were the following points (&theinferencethatcanbederived): - Basically, it's a problem of the kid that he is not happy with other family members. So the kid is at fault - basically meaning that the car is not easy to get repaired if there are any problems, 57

TAXILA BUSINESS SCHOOL hence its a problem with the car itself. - None of the other family members were able to control the kid It is true that all family members cannot repair (or even drive a car), but what has that to do with goingtotheauthorizedservicenetwork? - Maruti is known for having the biggest network of service stations across the country for car repair and services. But shouldn't it be easy to fix the problems of the car by not any Tom, Dick & Harry from a road side garage, but atleast by some known, reliable garages (like the relatives)Overall, this advertisement campaign appears to be good to me (personal thoughts), but as pointed above, it may be taken in a completely different way by someone else. Remember, our is a country that gives a very high regard to family relations so anything can be interpreted in any way.

HR DEPARTMENT Lead and Facilitate continuous change towards organizationalexcellence ; create a learning and vibrant organization with highsense of pride amongst itmembers. HR INITIATIVES • Prepare MUL Strategic Business Plan-2000-2003; To achievethe Vision & Goal • Improve the performance Appraisal system - it’s process, skill& usage • Introduce a Potential Appraisal System 58

TAXILA BUSINESS SCHOOL • Improvements in effectiveutilization.

internal

&

external

Training

&

it’s

Training need identification • Systematic career planning ; Job Rotation ; Empowerment;Job enrichment • Periodic communication meeting at various level; Roll out ofVision • Raise cost consciousness for cost control and reduction • Exposure on Brand Strategy to all non- marketing staff • Retention of Talent CULTURE BUILDING INITIATIVES SINCE INCEPTION Japanese Management philosophy of Team Spirit • Common uniform • Open office • Common Canteen • Open Office – Easy accessibility, Speedy • Communication and decision making • Morning Meetings • Morning Exercises FOCUS OF EFFECTIVE MANAGEMENT PROCESS SINCEINCEPTION • Management Committee Meetings – every Tuesday • ·Single unaffiliated Union • Excellent Industrial Relation scenario • No loss of monday due to strike/lockout etc. in past 5 yrs. • Maruti Udyog Sahyog Samiti – a forum for non unionizedstaff. • Declared organization structure Workers (Technical /Assistant.), Supervisors, Executives, Managers • Top Driven HR – MD is also Director HR • HR’s role of a facilitator • Line managers as HR Managers 59

TAXILA BUSINESS SCHOOL • Year of the Customer – • HR Internal Customer Focus • Focus on Internal & External Customer. INDUCTION AND SUCCESSION • Transparent Recruitment & Selection process • Recruitment on an All India Basis – no sector or regionspecific. • Engineers – CAMPUS - IITs/RECs/Rorkee /HBTI • ALL-INDIA TEST • MBAs – IIMs/XLRI • CAs - Rank Holders • India Exam & Apprenticeship In MUL • Lateral Entry for Experienced Professionals. MATTER USUALLY DISCUSSED IN THE MARUTI INDUCTION • Overview of Maruti and Suzuki • Building understanding of the car market in India and varioussegments • Understand MUL’s product range and positioning in eachsegment • Understanding the basics in the automobile industry • Role of financing as a sales tool and the various financing options available • Ensuring personal effectiveness • Understand the attributes of a good DSE • Overview of each Maruti model and the MUL ‘Advantage’ • Overview of the selling process and how to uncover needs of acustomer to do need based selling Induction program Objective: The objective of this program is to facilitate smooth induction of the new DSEs into their place of work i.e. Marutidealerships. This program attempts to orient the new DSEs 60

TAXILA BUSINESS SCHOOL on a fewimportant parameters, which are listed below: Overview of Maruti and Suzuki . Building understanding of the car market in India and varioussegments . Understand MUL’s product range and positioning in each segment . Understanding the basics in the automobile industry Overview of each Maruti model and the MUL ‘Advantage’ Overview of the selling process and how to uncover needs of acustomer to do need based selling . Role of financing as a sales tool and the various financing options available . Ensuring personal effectiveness . Understand the attributes of a good DSE RECRUITMENT PROCESS OF MARUTI UDYOG LTD The recruiting procedure at a Maruti dealership is as follows: For a particular city,For a particular Dealership The dealership should release an advertisement.Depending on availability of infrastructureInterview of shortlisted/ qualified personnel MEANING OF SELECTION It is the process of searching the potential candidate. It is negative in nature in the Indian context. But it is positive in the US context. Steps in Selection Process of Maruti udyog ltd Selection process consists of a series of steps, at each stage, factsmay come light which may lead to the rejection of the applicant. It is a series of successive hurdles or barriers which an applicant must cross.These hurdles or screens are designed to eliminate anunqualified candidate at any point in the selection processThere is no standards selection procedure to be used in 61

TAXILA BUSINESS SCHOOL allorganizations or for all jobs. The complexity of selection procedures increases with the level and responsibility of the positionto be filled. . 1} Preliminary Interview (screening applications) Initial screening is done to weed out totallyundesirable/unqualified candidates at the outset. It is essentially asorting process in which prospective candidates are given thenecessary information about the nature of the job and theorganization, at the same time, the necessary information is alsoelicited from the candidates about their education, skills,experience, salary expected and the like. It helps to determinewhether it is worthwhile for a candidate to fill up the applicationform. 2} Application Form Application form is a traditional and widely used device forcollecting information from candidates. It should provide all the information relevant to selection, where reference for caste, religion,birth place, may be avoided as it may be regarded an evidence ofdiscrimination. 3}Selection Test Psychological tests are being increasingly used in employeeselection, where a test may involve some aspect of an individual’sattitudes, behavior and performance. Tests are useful when thenumber of applicants is large, as at best it reveals that thecandidates who scored above the predetermined cutoff points arelikely to be more successful than those scoring below the cutoffpoint. 62

TAXILA BUSINESS SCHOOL 4} Employment Interview Interview is an essential element of selection and no selectionprocedure is complete without one or more personal interviews,where the information collected through application letter orapplication forms and tests can be cross-checked in the interview,where candidates demonstrates their capabilities and strength inrelevant to their academic credentials. selection in interview serves threepurposes: a) obtaining information about the background, education, training,work history and interests of candidate b) giving information to candidates about the company, the specific job and human resource policies; and c) establishing a friendly relationship between the employer and thecandidate so as to motivate the successful applicant to work forthe organization.However, in practice interview becomes a one-sided affair serving only the first purpose.

5} Medical Examination Applicants who have crossed the above stages are sent for aphysical examination either to the company’s physician or toa medical officer approved for the purpose. Such examination serves the following purposes:a) It determines whether the candidate is physically fit toperform the job, where those who are physically unfit arerejected. b) It reveals existing disabilities and provides a record of the employee’s health at the time of selection. This record will help in settling company’s liability under the workmencompensation Act for claim for any injury. c) It prevents the employment of people suffering from contagious diseases. 63

TAXILA BUSINESS SCHOOL d) It identifies candidates who are otherwise suitable but require specific jobs due to physical handicaps and allergies. 6} Reference Checks The applicant is asked to mention in his application form, the names and addresses of two or more persons who know him well. These may be his previous employers, heads of education institutions or publicfigures. These people are requested to provide their frankopinion about the candidate without incurring any liability. In government and public sector organizations, candidates are generally required to route their applications through their present employers, if any. The opinion of referees can be useful in judging the future behavior and performance of candidate, but is not advisable to rely exclusively on the referees because they are generally biased in favor of the candidate. (a) Most candidates are employed at the time of their application, and do not wish their employers to know they are looking elsewhere. (b) Because of prospective employer would be breaking a confidence if he or she asked for a reference before an offer of a job had been made and accepted. (c) By the time an offer has been accepted, selection is over and the reference is too late to affect it. (d) An offer may be made ‘subject to satisfactory references’, but as most references are received after the candidate has started work, they can only be used to warn managers of possible faults in the candidate which in serious cases may eventually lead to warningsfollowed by dismissal. (e) Employers giving references are usually extremely cautious; many references merely state the job title, the date of employment, and reasons for leaving. 64

TAXILA BUSINESS SCHOOL (f) References are occasionally biased, giving a good reference to hasten an employee’s departure or a poor one because of a grudge. Therefore, the best references are obtained in person, where there is a chance to see whether nonverbal behavior matches what is said. If such a meeting cannot be arranged, telephoning is the next best alternative. 7} Final Approval In most of the organizations, selection process is carried out by the human resource department, where the decisions of the department are recommendatory. The candidates shortlisted by the department are finally approved by the executive of concerned departments or units. 8} Employment. Employment is offered in the form of an appointment letter mentioning the post, the rank, the salary grade, the date by which the candidate should join and other terms and conditions in brief. In some organizations, a contract of service is signed by both the candidate and the representative of the organization. It is at this point where a selected applicant is handled with a letter of offer for a job: a) The wage or salary offered must not only be appropriate to the job and attractive to the candidate but consistent with the earnings of present employees. b) The job must be named and any special conditions stated, for instance, the first year you will be under training at the head office, then you will be transferred to up-country branches. c) The candidate must know the essential conditions of employment, such as hours of work, holidays, bonuses and fringe benefits. d) Any provisos must be clearly stated, for example, your employment will be subject to satisfactory references and 65

TAXILA BUSINESS SCHOOL medical examinations. Appointment is generally made on probation of one or two years, where upon satisfactory performance during this period, the candidate is finally confirmed in the job on the terms employed with, whether permanent or contractual basis. 9} Induction. The process of receiving employees when they begin work, introducing them to the company and to their colleagues, and informing them of the activities, customs and traditions of the company is called induction. At this juncture various induction courses are done to new recruit in order to acclimatize them with the new working environment. 10} Follow – up (Evaluation) All selection should be validated by follow-up, it a stage where employee is asked how he or she feels about progress to date and the worker’s immediate supervisor is asked for comments, which are compared with the notes taken at the selection interview. If a follow-up is unfavourable it is probable that selection has been a fault; the whole process from job specification to interview is then reviewed to see if a better choice can be made next time. Training Maruti arranges the training at several intervals. The training is mandatory for all the employees. The training schedule of all employees is maintained by the HR manager. EDP 66

TAXILA BUSINESS SCHOOL In the EDP Department following are managed: ➢ Post Sale Process is managed. ➢ Sales Analysis is done. ➢ Backup is taken time to time. IMPORTANCE OF TRAINING Optimum Utilization of Human Resources – Training and Development helps in optimizing the utilization of human resource that further helps the employee to achieve the organizational goals as well as their individual goals. • Development of Human Resources – Training and Development helps to provide an opportunity and broad structure for the development of human resources’ technical and behavioral skills in an organization. It also helps the employees in attaining personal growth. • Development of skills of employees – Training and Development helps in increasing the job knowledge and skills of employees at each level. Ithelps to expand the horizons of human intellect and an overall personality of the employees. • Productivity – Training and Development helps in increasing the productivity of the employees that helps the organization further to achieve its long-term goal. • Team spirit – Training and Development helps in inculcating the sense of team work, team spirit, and inter-team collaborations. It helps in inculcating the zeal to learn within the employees. • Organization Culture – Training and Development helps to develop and improve the organizational health culture and effectiveness. It helps in creating the learning culture within the organization. • Organization Climate – Training and Development helps building the positive perception and feeling about the organization. The employees get these feelings from leaders, subordinates, and peers. 67

TAXILA BUSINESS SCHOOL • Quality – Training and Development helps in improving upon the quality of work and work-life. • Healthy work-environment – Training and Development helps in creating the healthy working environment. It helps to build good employee, relationship so that individual goals aligns with organizational goal. • Health and Safety – Training and Development helps in improving the health and safety of the organization thus preventing obsolescence. • Morale – Training and Development helps in improving the morale of the work force. • Image – Training and Development helps in creating a better corporate image. • Profitability – Training and Development leads to improved profitability and more positive attitudes towards profit orientation. • Training and Development aids in organizational development i.e. Organization gets more effective decision making and problem solving. It helps in understanding and carrying out organizational policies • Training and Development helps in developing leadership skills, motivation, loyalty, better attitudes, and other aspects that successful workers and managers usually display. Training Details The strength of any organization is its manpower. Each organization would like to have executives who are well trained so that they can be more productive. The vehicle manufacturers conduct several trainings sothat they can achieve their goals. In the Training master form, you can enter the information about the training, which have been conducted during a particular time period. We are also maintaining the information regarding the attendance of the executives in a specific training. That is, how many executives out of the given list have attended the training? 68

TAXILA BUSINESS SCHOOL With the help of these training details we are generating various MIS reports. The details provided here can help the management to find out an efficient person for a special task. Searching facility is also available, so you can find out the total information of a particular training with just one click over there. SALES AND TRAINING DEPARTMENT OF MARUTI UDYOG Vision “Equipping MUL and Dealer Sales Fraternity with the requisite mindset, knowledge and skills, and enhance the business value of our associates to sustain our position of leadership and build customer loyalty to MUL” Objectives To ensure multiple knowledge and skill development of DSEs required selling cars and handling competition ➢ Consultative Selling Approach. ➢ Continuous Feedback and Performance monitoring. ➢ To employ training as a tool to achieve customer delight and customer loyalty ➢ Make DSEs as Car Advisors and be a single window interface with the customer

69

TAXILA BUSINESS SCHOOL

FINANCIAL ANALYSIS OF THE COMPANY

Financial highlights

70

TAXILA BUSINESS SCHOOL Parameters

Q3’F09

Net sale(Rs Mn)

45126

46540

-3%

887

853

4%

1777

854

108%

4745

7839

39%

1775 2925

867 6828

105%

Other Income Operating (Rs Mn) Other Income Non Operating

Q3’F08

change

(Rs Mn) EBITDA (Rs Mn) Depreciation (Rs Mn) Profit Before Tax (Rs Mn)

57%

Profit After Tax (Rs Mn) EPS (Rs)

2136 7.39

4670 16.17

71

54 54%

TAXILA BUSINESS SCHOOL Financial highlights

Parameters

Q3’Fy 09

Q3’Fy08

change

81.14%

76.84%

4.30%

Employee Cost

2.45%

2.08%

0.37%

Selling & Distribution expenses Manufacturing Expenses

3.69%

2.75%

0.94%

8.66%

5.59%

3.07%

3.53%

2.60%

0.93%

1.18%

0.78%

0.30%

3.93%

1.86%

2.07%

10.51%

16.84%

6.33%

6.48%

14.67%

8.19%

Material Cost

Royalty Power & Fuel Depreciation Ebitda PBT

72

TAXILA BUSINESS SCHOOL PAT

4.73%

10.04%

5.31%

Other Income (Operating + Non Operating)

5.90%

3.67%

2.23%

Financial Analysis (Q3FY09 vs Q3FY08)  Material cost to net sales increases by 4.30 % to 81.14%  1.7% - Higher commodity cost primarily steel  1.4% - Yen appreciating against rupee by ~ 50% appx impacting import cost –1.4%  1.6% - Product Mix  0.8% - Higher invoice discounts  (1.0)% - favorable selling price variance   Selling & distribution expenses increased by 0.94% to 3.69% ○ Selling expenses increased by 0.26% to 2.18% ○ A Star launch / marketing expenditure  Distribution expenses increased by 0.68% to 1.51%  Higher ocean freight

73

TAXILA BUSINESS SCHOOL

Financial Analysis (Q3FY09 vsQ3FY08)

 Manufacturing over heads increases by 3.07% to 8.66% ○ Royalty increased by 0.93% to 3.53% ○ Increase in average selling price (base for calculating royalty)by 11% ○ Increase in number of models on which royalty is paid ○ Yen appreciating against rupee by ~ 50%

 Power cost increased by 0.40% to 1.18%  Higher cost of power generation at Manesar –use

of diesel in place of natural gas  Share of units from Manesar plant out of total sales increased  Exchange Variation Rs 412 Mn  Increase in employee cost by 0.37% to 2.45% ○ Increase in number of employees to 7,755 from

6,903 (Q3Fy08) ○ Recruitments for K Series engine plant, expanded capacity at Manesar and R&D 74

TAXILA BUSINESS SCHOOL

Financial Analysis (Q3FY09 vsQ3FY08)  Other Income  Rs 1,777 Mn non operational (Rs 854 Mn in Q3FY08)

 Higher yields ~ 12.5% (pre tax)

 One time interest on tax refunds Rs 569 Mn  Depreciation increased by 2.07% to 3.93%  Revision of useful life of fixed assets was done in Q4FY08

 In Q3FY09 impact is Rs 585 Mn

 Normalized depreciation is 2.64%  Average Realization (ASP) increased by 10.8% to Rs. 240,081 ○ Exports –higher realization

○ Domestic –product mix

75

TAXILA BUSINESS SCHOOL

Cash Flow of Maruti Suzuki India

------------------- in Rs. Cr. -------------------

Mar '04 Mar '05

Mar '06 Mar '07

Mar '08

12 mths 12 mths 12 mths 12 mths 12 mths Net Profit Before Tax

769.80

1304.9 0

1750.0 0

2279.8 0

2503.0 0

Net Cash From

1035.9

1073.7

1222.6

2028.0

1830.4

76

TAXILA BUSINESS SCHOOL Operating

0

0

0

0

0

2436.8

3061.5

Activities Net Cash (used in)/from Investing Activities

- -192.70 -530.70 1551.1 0

Net Cash (used in)/from Financing Activities

-234.00

-91.80 -319.70

430.00

132.30

Net (decrease)/increase In

-749.20

789.20

372.20

21.20

1098.8

Opening Cash & Cash Equivalents

989.40

240.20

1029.4

1401.6

1422.8

Closing Cash & Cash Equivalents

240.20 1029.4

1401.0

1422.8

324.00

Cash and Cash Equivalents

FINANCIAL RESULTS The Companys performance during the year is summarised below:

77

TAXILA BUSINESS SCHOOL (Rs.in Million) 2007-08 2006-07 Gross Total Income 178,043

219,128

Profit before Tax 22,798

25,030

Provision for taxation (Incl. Prev. Year) 7,178

7,722

Profit after Tax 15,620

17,308

Balance brought forward 43,939

56,373

MSAIL (Maruti Suzuki Automobiles India Limited) Loss: Adjusted on Amalgamation and Transition Adjustment for Employee Benefit 88 Profit available for appropriation 59,471

0

73,681

Appropriations: Debenture Redemption Reserve 17

0

78

TAXILA BUSINESS SCHOOL General Reserve 1,562

1,731

Proposed Dividend 1,300

1,445

Corporate Dividend Tax 219

248

Balance carried forward to Balance Sheet

70,257

56,373

FINANCIAL HIGHLIGHTS The gross revenue (net of excise) of the Company for the year was Rs. 188,238 million as against Rs. 152,523 million in the previous year showing an impressive growth of 23.4%. Earnings before depreciation, interest, tax and amortization (EBDITA) stood at Rs. 31,308 million against Rs. 25,888 million in the previous year, recording a jump of 20.9%. Based on technical evaluation and market considerations, the Company has, with effect from 1st April 2007, revised the estimated useful life of certain assets which resulted in depreciation being higher by Rs. 2,122 million for the current year with a corresponding reduction in profit for the year and net fixed assets. Profit before tax (PBT) stood at Rs. 25.030 million against Rs. 22,798 miilion in the previous year showing a growth of 9.8% and Profit after Tax (PAT) stood at Rs. 17,308 million against Rs. 15,620 million in the previous year showing a growth of 10.8%. DIVIDEND The Board recommends a dividend of 100% (i.e. Rs. 5 per equity share of Rs. 5 each) for the year ended 31st March 2008 amounting to Rs. 1,445 million as against a dividend of 90% . 79

TAXILA BUSINESS SCHOOL amounting to Rs. 1,300 million, paid for the year ended 31st March 2007.

4P’s OF MARUTISUZUKI SWIFT

➢ PRODUCT ➢ PRICE 80

TAXILA BUSINESS SCHOOL

➢ PROMOTION ➢ PLACE

PRODUCT Features: The all-new Maruti Suzuki Swift is fully loaded with a range of exciting new features. It's a perfect complement to your evolved tastes and lifestyle. And the best way to take your driving pleasure to a brand-new high. European Styling. Japanese Engineering. Dream-Like Handling.The new Swift is a generation different from Suzuki design. Styledwith a clear sense of muscularity, its one-and-a-half box, aggressive form makes for a look of stability, a sense that it is packed with energy and ready to deliver a dynamic drive. Its solid look is complemented by an equally rooted road presenceand class-defining ride quality. New chassis systems allow for the front suspension lower arms, steering, gearbox and rear engine mounting to be attached to a suspension frame. You get lower road noise, and a greater feeling of stability as you sail over our roads with feather-touch ease. There are three variants of Maruti Suzuki Swift : ➢ Swift LXi ➢ Swift VXi ➢ Swift ZXi ➢ Swift LXi 3 assist grips, 3 spoke urethane steering wheel, antenna, cabin light (3 position), console box (lower), cup holders (front 2, rear1), front door trim pockets, green tinted glass window, halogen headlamps, headlamp leveling device, heater and manual Air conditioning, OVRM (internally adjusted), rear fog lamps, wind screen wiper 2 speed plus 1 speed intermittent, tailgate opener key type, trip meter(digital display), sun visors (both sides), brake assist , child lock (rear door), high mounted stop lamp, power 81

TAXILA BUSINESS SCHOOL steering, rear seat belts etc. are the features available in this model. ➢ Swift VXi Apart from the features found in other model, striking features of this model are black colored A & B pillars, 12v accessory socket in center console, day and night rear view mirror, door ajar warming lamp, driver's seatbelt warning lamp, tachometer, driver's seat belt warning lamp, vanity mirrors (sun visor co-driver side), rear seat head restraints, fabric accented door trims, central door locking (4 door), front and rear electronic windows, front fog lamps, light off/ key reminder, manual air-conditioning, key not removed warning buzzer, etc. ➢ Swift ZXi Special features that have made this model more market friendly are rear window demister, rear parcel shelf, rear window wiper, room lamp and luggage room, keyless entry,dual front airbags, colored outside door mirror cowls, colored outside door handles, 12vaccessory socket in luggage room, driver seat height adjuster, central door locking (5 doors), seat belts 3-point ELR with shoulderNadjusters, seat belts front 3-point ELR with pretensioning,tailgate opener electromagnetic type etc.

Price Maruti is expected to take Hyundai heads on with the pricing of their upcoming Maruti Suzuki Swift car. After launching cars for the masses since so many years, India’s largest automobile manufacturer is now targeting the premium segment with their 82

TAXILA BUSINESS SCHOOL latest model from the Suzuki’s stable. The analysts predict the pricing of this premium hatchback to start from Rs. 4 lakh. This price range would practically rip apart Hyundai’s offering in Getz, which is priced at a much higher tag of Rs. 4.5 lakh. Both the companies are known for their value based offerings and Maruti with their extensive service network and brand reputation for making reliable cars should get the customer’s nod over their competition. The official pricing however is still not out. However, the company is said to be studying the prospects of launching the base model at the 4-lakh price tag. There is another advantage in doing so considering in the capital city of Delhi NCR road tax on the sub 4 lakh priced cars is comparatively lower at 2%. Cars at a price higher than 4 lakh have to pay a 4% road tax. Delhi NCR is one of the major targeted markets and it might get the benefit of this policy. And if they indeed do take the chance ofpricing Suzuki Swift at a considerable lower price than Hyundai Getz, they would quite likely force the competition to rethink their strategy. Swift LXi 416485 416485 Swift VXi 443924 443924 Swift VXi (ABS) 464962 464962 Swift ZXi 528096 528096

PROMOTION When Maruti Udyog launched the Swift in May last year, the automotive industry was agog with expectation that the car had the makings of a real winner. Three versions were launched with the base variant carrying a retail tag of Rs 3.85 lakh, exshowroom, New Delhi, and this aggressive pricing only reinforced 83

TAXILA BUSINESS SCHOOL this feeling.A year later, the company says the Swift is now the most-sold car in the first year of any car in the history of the Indian automobile industry, having totted up sales of 61,200 units. This is higher than what Maruti had initially planned to sell. The car recorded an estimated 4,000 bookings at the time of its launch, and the initial output of 200 units a day on a two-shift basis, wasn’t enough to cope with demand. In October, the company increased capacity for the Swift which helped cut down on the waiting time from an estimated three months. The company currently makes over 300 units every day. The Swift has made a real impact in the small hatchback segment leaving its closet rival, the Getz far behind. Between April 2005 and April 2006, Hyundai sold 16,872 units of the Getz. Maruti is now gearing up for the diesel version of the Swift which is expected to debut by October. The diesel version will benefit from the excise sops in this year’s buget, and it remains to be seen how the models fares in the marketplace.

PLACE The car manufacturing company, called Maruti Suzuki Automobiles India Limited, is a joint venture between Maruti Udyog and Suzuki Motor Corporation holding a 70 per cent and 30 per cent stake respectively. The Rs1,524.2 crore plant has a capacity to roll out 1 lakh cars per year with a capacity to scale up to 2.5 lakh units per annum. The car manufacturing plant will begin commercial production by the end of 2006.

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TAXILA BUSINESS SCHOOL The engine and the transmission plant has owned by Suzuki Powertrain India Limited in which Suzuki Motor Corporation would hold 51 per cent stake and Maruti Udyog holding the balance. The ultimate total plant capacity is three lakh diesel engines. However, the initial production is 1 lakh diesel engines, 20,000 petrol engines and 1.4 lakh transmission assemblies. MUMBAI - Showrooms ➢ AUTOMOTIVE MANUFACTURERS LTD MIDC,TTC INDL.AREA, PLOT NO.D-234,SHIRVANE VILLAGE BOMBAY PUNE ROAD ➢ Autovista 257,S.V. ROAD, BANDRA (W) MUMBAI MAHARASHTRA ➢ M/S SK WHEELS PVT LTD SITE NO. D-267 TTC INDUSTRIAL AREA, MIDC TURBHE, NAVI MUMBAI ➢ NAVNIT MOTORS PVT LTD GOKUL NAGAR MUMBAI-AGRA ROAD, THANE-400 061 ➢ RATAN MOTORS 23/24 BEZZOLA COMPLEX SION-TROMBAY ROAD CHEMBUR ➢ SAH and SANGHI AUTO AGENCIES (P) LTD GIRI KUNJ, 11-C N S PATKAR MARG KEMPS CORNER ➢ SAI SERVICE STATION LTD PHOENIX MILL COMPOUND, 462,SENAPATI BAPAT MARG, LOWER PAREL, 85

TAXILA BUSINESS SCHOOL

SWOT ANALYSIS OF THE COMPANY ➢ ➢ ➢ ➢

STRENGTHS WEAKNESSES OPPORTUNITIES THREATS STRENGTHS

The Quality Advantage Maruti Suzuki owners experience fewer problems with their vehicles than any other car manufacturer in India (J.D. Power\ IQS Study 2004). The Alto was chosen No.1 in the premium compact car segment and the Esteem in the entry level mid - size car segment across 9 parameters. The J.D. Power APEAL Study 2004 proclaimed the Wagon R no. 1 in the premium compact car segment and the Esteem No.1 in the entry level mid - size car segment. This study measures owner in terms of design, content, layout and performance of vehicles across 8 parameters. A Buying Experience Like No Other Maruti Suzuki has a sales network of 307 state-of -the-art showrooms across 189 cities, with a workforce of over 6000 trained sales personnel to guide our customers in finding the right car. Our high sales and customer care standards led us to achieve the No.1 nameplate in the J.D. Power SSI Study 2004. Quality Service Across 1036 Cities

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TAXILA BUSINESS SCHOOL In the J.D. Power CSI Study 2004, Maruti Suzuki scored the highest across all 7 parameters: least problems experienced with vehicle serviced, highest service quality, best in-service experience, best service delivery, best service advisor experience, most user-friendly service and best service initiation experience. 92% of Maruti Suzuki owners feel that work gets done right the first time during service. The J.D. Power CSI study 2004 also reveals that 97% of Maruti Suzuki owners would probably recommend the same make of vehicle, while 90%owners would probably repurchase the same make of vehicle. WEAKNESS • (Not so well-known in this segment • Comparatively less mileage-there is a also weakness of maruti suziki .milage of maruti product is less than other.so this is a big weakness of maruti. • ESTABLISH PROPER POLICIES AND PROCEDURE FOR LEAVE • PROPER COMMUNICATION OF POLICIES TO WORKERS • ATTITUDE OF SUPERVISOR • INSTALLATION OF HIGH CAPACITY GENERATORS

OPPORTUNITIES 87

TAXILA BUSINESS SCHOOL • ESTABLISH PROPER POLICIES AND PROCEDURE FOR LEAVE • PROPER COMMUNICATION OF POLICIES TO WORKERS • ATTITUDE OF SUPERVISOR • INSTALLATION OF HIGH CAPACITY GENERATORS

THEARTS Maruti has always been identified as a traditional carmaker producing value-for-money cars and right now the biggest hurdle Maruti is facing is to shed this image. Maruti wants to change it for a more aggressive image. Maruti Baleno has failed due to one of the major reasons being thatcustomers could not identify Maruti with a car as sophisticated as Maruti Baleno. Maruti is looking forward to bring about a perception change about the company and its cars.Maruti started the exercise with the newlook Zen, and Suzuki's decision to pick India as one of the first markets for this radically different-looking car gave this endeavor a nethrust. Maruti has also changed its logo at the front grill. It has replaced the traditional Maruti logo on grill ‘stylish ‘M’ with S’. The major thrust in the facelift endeavour is with the launch of 1.3 litre Swift. It’s a style statement from Maruti to Indian market. The next threat Maruti faces is the growing competition in compact cars.Companies like Toyota, Ford, Honda and Fiat are planning to come out with small segment cars in near future.Ford is launching Focus and Fiesta, GM is launching Aveo in 2006, Chevrolet is launching Spark in 2006, Hyundai is launching its new compact car in 2006, Honda is launching Jazz in 2006, GM is has reduced prices of its Corsa, Fiat is coming up with Panda and new Fiat Palio, Skoda is launching Fabia. All this will pose a major threat to Maruti leadership in compact cars. New 88

TAXILA BUSINESS SCHOOL emission norms like Bharat Stage 3 which has come into effect from April 2005 has increased car prices by Rs.20000 and Bharat Stage 4 which is coming into force in 2007 will contribute in increasing car prices further. This could be of concern to Maruti which is low cost provider of passenger cars. Rise in petrol prices and growing popularity of other substitute fuels like CNG will be another threat to Maruti. There is also a threat to Suzuki from R&D investment by Toyota and Honda in Hybrid cars. Hybrid cars could run on both petrol and gaseous fuels. There is a threat to Maruti models ageing. Maruti models like Maruti 800 which is in market for the last twenty years and others like Zen and Esteem which have also entered the decline phase are the other threats. Maruti is planning phasing out Zen in 2007 and there were rumors of phasing out Maruti 800 also. This all makes Suzuki to replace these brands with new launches . As Swift and Wagon R are replacing the Zen market. Maruti will have to keep on makingN modifications in its present models or its models will face extinction.

COMPETITORS OF MARUTI SUZUKI SWIFT Hyundai Unlike most other MNCs, Hyundai of South Korea decided to enter India with its small car model, Santro, which it priced attractively at about $7000. Hyundai chose to set up a fully owned subsidiary and hired some of the most reputed executives in the Indian automotive industry. Hyundai also invested heavily in a modern car plant near the city of Madras, in the southern part of India. The facility can manufacture 130,000 engines, transmission sets and components per annum. According to Business India1, “What 89

TAXILA BUSINESS SCHOOL makes HMI’s (Hyundai Motor India) progress even more impressive is that the Sriperambadur plant is not another knocked down (KD) operation but an integrated manufacturing facility. The Santros that will roll out of this plant will be manufactured from day one and not merely assembled. This is a historic achievement. No company has begun operations in this manner, not even Maruti Udyog, which initially imported CKD kits for the Maruti 800... The very essence of Hyundai’s strategy is to localise heavily from day one to give it a very early cost advantage, the number one priority in this highly price sensitive market.” The Santro has been a major success. Though not very elegant looking, the car has enough leg and head room. Hyundai sold more than 75,000 vehicles during the period April 1999 - March 2000 and looks set to cross the 100,000 figure in the current year. During the period January-June, 2000, Hyundai sold 45,513 units, against 21,884 in 1999. Encouraged by the success of the Santro, Hyundai launched the up market Accent model.A major worry for Hyundai is that it has just one small car in its stable. Hyundai is pinning its hopes on luxury models such as the Sonata, priced at around Rs 12 lakhs, but as the company's senior executives themselves admit, such models are unlikely to sell more than 250 units per month. Hyundai is also vulnerable because of its relatively small size, when compared to global majors such as Ford, General Motors, Toyota, Daimler Chrysler, Volkswagen and Honda. Telco Founded in 1945, the Tata Engineering and Locomotive Company (Telco) is one of the leading players in the Indian automobile industry. In its early years, Telco manufactured only commercial vehicles, through a technical collaboration with Mercedes Benz of 90

TAXILA BUSINESS SCHOOL Germany. Starting with the 1980s, Telco has moved into light commercial vehicles, pick-up trucks, multi-utility vehicles, large cars and finally, small cars. The Tata Mobile pick-up truck launched in 1988 was probably a turning point in Telco’s history. The model failed to build volumes, but gave Telco engineers confidence in their design capabilities. Telco then launched its big cars, Tata Sierra (1991) and Tata Estate (1992). Both these cars have been more or less phased out, as Telco decided to take a plunge into the mass market small car segment1. The star in Telco's portfolio today is the small car, Indica, designed in Italy, but manufactured in India as an almost completely indigenous effort. The car has a distinctive look and sufficient space but its engines can probably be improved. At the time of launch, the Indica was plagued by quality problems. Telco engineers, however, ironed these out in quick time. Priced at just over Rs. 3 lakhs, the Indica offers value for money and has catapulted Telco to a position in which it is one of the few serious challengers to MUL. In the Rs 3 - 4.5 lakh price segment consisting of the Santro, the Zen, the Matiz, the Wagon R and the Uno, Indica has a market share of 21%. One concern expressed by analysts is Telco's staying power. The project will not break even for some time. As Business Today2 recently remarked: "The car foray is sucking Tata Engineering into a vicious loop: as its losses keep mounting, the breakeven target keeps getting pushed back further. As things stand today, analysts point out that to make money, Tata will have to sell close to one lakh cars, against the original target of 90,000 cars and the project cost has escalated to over Rs 2000 crores." Some analysts even suggest that Telco should spin off its car venture and offer a stake to a foreign car major. Another worry for Telco is that it is dependent

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TAXILA BUSINESS SCHOOL on just one model. To be a serious player, the company needs a couple of additional models which would obviously cost money. Daewoo Daewoo entered India in 1995 through a joint venture with the local DCM group. Japanese car major Toyota, also had a small stake in the project. Daewoo later hiked up its equity stake to take complete control of the venture. Daewoo's first model for the Indian market was the Cielo. Initially, Cielo seemed to be doing well, selling about 1000 units per month. Later, as competing models arrived, Cielo's sales dropped sharply. Daewoo reacted by offering major discounts. This only hurt the car's image and did little to boost sales. Daewoo attempted to learn from its experience, by launching its small car, the Matiz in late 1998. Although the Matiz was initially priced high, Daewoo quickly cut the price to grab market share. The Matiz is today priced attractively and is one of the most stylish small cars currently available in India. Daewoo has pinned its hopes on the Matiz to make a comeback and catch up with arch rival, Hyundai. Daewoo however faces major challenges in the months ahead. Its parent company in Korea is in big trouble and is on the verge of being sold off. It has only one small car model. The company's operations in India are still to stabilize, with losses of Rs. 40.14 crore during 1998-99. In the wake of the uncertainty over the future of its parent company, Daewoo has postponed the launch of its luxury car models, Nubira and Leganza. Hyundai Santro 1.1 CRDi When Hyundai launch the Santro’s replacement in 2007, it will come with the surprise addition of a 1.1 litre common rail diesel. Likely to be the cheapest car on sale powered by a CRDi engine, this motor is the new Accent’s CRDi unit less one cylinder. 92

TAXILA BUSINESS SCHOOL Incredibly powerful for its size, this 1,120cc engine produces a whopping 75bhp. Unconfirmed reports talk of overall figures, city and highway combined, in excess of 20 kilometres a litre. Hyundai Getz 1.5 CRDi Not as attractive as the Swift, but more practical, with greater rear seat comfort and more useable space, Hyundai’s diesel assault continues up the range with its large hatch. The Getz will share its motors with the new Accent/ Verna. Hyundai sell the Getz powered by a detuned version of the new Accent motor in the European continent, and it’s likely to be the case here as well. Producing 87bhp as against 108bhp, using two versions of the same engine will help Hyundai get a handle on costs. The diesel Getz also qualifies for excise sops, meeting both length and engine capacity criteria. Tata Indica 1.3 Multijet By the time the larger new Indica is out, the Tata-Fiat tie-up will be going full throttle. Tata will borrow engines from Fiat with, you guessed it, the 1.3 litre Multijet being the engine of choice. Thoroughly localised, cheaply assembled and very capable, it will give the new Indica/ Indigo family a huge leap forward as far as overall ability is concerned.

Conclusion Based on these factors the various strategic alternatives were evaluated. The areas of strategic thrust which Maruti can concentrate on are identified. The various course of action for 93

TAXILA BUSINESS SCHOOL these strategic thrust areas and suitable matrixes evaluate them are identified.

Strategic Thrusts Increases Scope New product Same market New product New market Market rationalization Distribution rationalization

Wallet shares

HOLD ON

Action

Measures

Tap the huge Percentage of component & sales from new accessories market products Enter fast growing CV ROE,ROA segment and global platforms Expand geographically Increase in – Europe and alternate profitable market energy share Finding rural markets, Customer Online trade satisfaction Separate dealers based Dealer on value profitability, Percentage of cannibalization Concentrate more on Percentage profit customer solution for each business unit “4 for 2”when 1 lac car Number of Maruti is introduced 800s sold

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TAXILA BUSINESS SCHOOL Maruti Suzuki India Ltd (MSIL) has the highest marketshare in the automobile sector in India. To consolidate and protect its leadership position, the market research team conducts a continuous Brand Track study with an all-India scope. Amongst other things them survey looks at: Brand Awareness, Advertising Recall, Product Experience, Company Image and Competition Analysis.

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