Corporate Hero Maruti Group 3

8/3/2019 Corporate Hero Maruti Group 3

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Maruti SuzukiCorporate Hero

3/30/2011

Group 3:

Kumar Abhishek (026/1)

Mayank Kumar (028/1)

Pratyush Raj (033/1)

Saurabh Pratap Singh (040/1)


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Contents

Executive Summary ............................................................................................................... 3

Profile ..................................................................................................................................... 4

Marketing Strategies and Positioning .................................................................................... 6

Analysis .................................................................................................................................. 9

Corporate Social Responsibility ........................................................................................... 12

Future Ahead ........................................................................................................................ 14

Appendix .............................................................................................................................. 16

References ............................................................................................................................ 18


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Executive Summary

The report aims a providing an overview of Maruti Suzuki and its performance over the past

25 years. Maruti Suzuki has been a great success story in the Indian Automobile Industry. It

played an extremely significant role in changing the public perception about passenger cars,

as a medium of transportation. When Maruti Suzuki first started its operations in India, at that

time, cars were thought of as a symbol of luxury but since then the perception has changed

dramatically and passenger cars have become extremely affordable even for the Indian

middle class. Though a lot of factors have brought about this change but Maruti played a

crucial role in this transformation.

Maruti not only made cars affordable for the average Indian family but it also underlined the

importance of innovation in the automobile industry. When Maruti Udyog Limited (MUL)

was set up in India, there were only two major car manufacturers in India: Hindustan Motors

(makers of Ambassador car) and Premiere Padmini. Both these cars enjoyed the luxury of

great market share and no significant threat of any other potential competitor. This sense of

assurance, in a way, prevented these manufacturers from innovating and from offering

something better to the customers. In a very short of span of time, Maruti came out with 3

different models namely: Maruti 800, Maruti Omni and Maruti Gypsy and thus began a story

that completely changed the landscape of Indian Automobile Market.

In the past 27 years (since Marutis inception), many new companies, foreign and domestic,

entered the passenger car market in India but Maruti still remains the undisputed leader. The

report focuses on some strategies adopted by Maruti to create a niche for its cars and how

Maruti has been able to meet consumers expectations over all these years.


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Profile

Maruti Suzuki is one of India's leading automobile manufacturers and the market leader in

the car segment, both in terms of volume of vehicles sold and revenue earned. Until recently,

18.28% of the company was 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

2003. As of May 10, 2007, Govt. of India sold its complete share to Indian financial

institutions. With this, Govt. of India no longer has stake in Maruti Udyog.

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.

The company annually exports more than 30,000 cars and has an extremely large domestic

market in India selling over 500,000 cars annually. Maruti 800, till 2004, was the India's

largest selling compact car ever since it was launched in 1983. More than a million units of

this car have been sold worldwide so far. Currently, Maruti Alto tops the sales charts.

Maruti Suzuki India Limited, a subsidiary of Suzuki Motor Corporation of Japan, has

been the leader of the Indian car market for over two decades.

Its manufacturing facilities are located at two places: Gurgaon and Manesar, south of

New Delhi. Manesar and Gurgaon facilities have a combined capability to produce over

700,000 units annually. More than half the cars sold in India are Maruti cars. The company is

a subsidiary of Suzuki Motor Corporation, Japan, which owns 54.2 per cent of Maruti. The

rest is owned by the public and financial institutions. It is listed on the Bombay Stock

Exchange and National Stock Exchange in India.

During 2007-08, Maruti Suzuki sold 764,842 cars, of which 53,024 were exported. In

all, over six million Maruti cars are on Indian roads since the first car was rolled out on

December 14, 1983.


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Maruti Suzuki offers 10 models, ranging from the peoples car, Maruti 800, for less

than Rs 200,000 ($ 5000) ex-showroom to the premium sedan SX 4 and luxury SUV, Grand

Vitara. Maruti is clearly an employer of choice for automotive engineers and young

managers from across the country. Nearly 75,000 people are employed directly by Maruti and

its partners.

The company vouches for customer satisfaction. For its sincere efforts it has been

rated (by customers) first in customer satisfaction among all car makers in India for seven

years in a row in annual survey by J D Power Asia Pacific. Maruti Suzuki was born as a

government company, with Suzuki as a minor partner, to make a peoples car for middle

class India. Over the years, the product range has widened, ownership has changed hands and

the customer has evolved. What remains unchanged, then and now, is Marutis mission to

motorize India.

Vision: The Leader in the Indian Automobile Industry, Creating Customer Delight and

Shareholder's Wealth; A pride of India.

Core Values:

Customer Obsession Fast, Flexible & First Mover Innovation & Creativity Networking & Partnering Openness & Learning

Mission: To achieve goals which are specific, realistic and motivating. This includes:

Modernization of Indian Automobile Industry Production of fuel efficient cars to conserve scarce resources Production of large number of vehicles necessary for economic growth of country Market development along with product development and diversification


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Marketing Strategies and Positioning

Porters Generic Strategies:

Differentiation:

a) Performanceb) Mileagec) Suitable for Indian road conditionsd) Less maintenance coste) Resale Pricef) After Sales services

PromotionalStrategies:

I. Maruti driving schoolII. Sponsorship of sports events like Road Racing, golf, polo, etc.

III. CSR programs (like traffic beat in Delhi, Chennai)IV. Promotion through conventional mediaConventionalStrategies:

i. Variety of products with varying prices to cater all the segmentsii. The pricing strategy is to provide options to the customers looking for upgradation in

their car holding

iii. Setting up of diesel engine plant and want to be a major player in diesel vehiclesmarket.

iv. Entering into some unconventional markets like Uganda, Chile, Costa Rica, etcbecause they are the most attractive possibilities for future.


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Repositioning of Brands (pacing up with changing expectations):

Usage of MPFi technology in M-800; changes in front grill, head light, rear light andround curves all around

Interiors and exteriors of Maruti Omni Zen has been face lifted four times till date, new variant Zen classic Prices of Versa has been slashed, new price starts at 3.3 Lacs Esteem has got three face lifts, new variant counters the warning situation of declining

sales

Wagon R look has been modified to be sporty Baleno was launched at 7.2 l in 1999 but prices slashed to 6.4 l.

2762

10875

54763

10453

270.80

10000

20000

30000

40000

50000

60000

2 4 6 8 10 12 14 16 18

quantity sold (2010)

Prices in Lakhs

QuantitySold Future Market segment:

800 000-1500 000 RsCurrent Cluster


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As pointed out in the above graph, Maruti has defined its positioning in the price range of

300,000 to 650,000. Nearly 80% of Maruti sales fall in this range. This figure even tells us,

why Maruti is considered as a poor mens car. Clearly, Maruti enjoys a leaders stature in

small market segment.

This graph shows another important dynamics of market. Earlier, Maruti800 was the

dominant feature of Marutis portfolio but now it has given way to the cars which stand

above M-800 in price range. This shows the increasing purchasing power of Indian

population and changing sense of luxury & consumption pattern. With increase in income,

People tend to shift to higher value objects as the income elasticity of such products is greater

than 1.

The explained market dynamics also enable us to predict the future trends upto a reasonable

certainty. The future market is going to be clustered in the price range of 800,000 to 1500,000

Rs. So Maruti should focus on this price segment and redefine its position accordingly.


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Analysis

Porters Five Forces Analysis:

FIVE FORCES

New Entrants

BuyersSuppliers

Substitutes

Industry Rivalry

Threat of substitutes:

Low to medium

Consumer may shift to

hybrid cars

Power of Buyers:

Increasing, High

awareness,

Power of Suppliers:

Decreasing, High no.

of suppliers, bulk

buyer can bargain

Threat of new

entrants: Increasing,

Favorable govt. policies,

global players eyeing

Rivalry: High, High

comp in small and

mid size car segment


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PEST Analysis:

Political Condition

Maruti Ltd acquired byIndian Government

Various Concessions

In may 2002, Cabinetcommittee of

disinvestment approve the

exit of Govt. from joint

Economical Condition

Market share rising by9.5% YoY

Economic Revival of Indiais boosting demand

Entry of the new playersin market because of long

term profit prospect

Social Condition

Changing life style in urbanIndia

Consumer preferences infavor of upgradation

Close to 10+ Millionpeople is earning greater

than 12 lacs per annum

Technological Condition

Transfer of technology fromJapan

Automation of newproduction assemblies

Rapid change inenvironmental standard

PEST Analysis


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SWOT Analysis:


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Corporate Social Responsibility

Maruti has always been very committed to conserve the natural resources and has always

advocated the use of renewable sources of energy. This attempt at saving the environment

highlights the Corporate Social Responsibility undertaken at Maruti. In recognition of its

commitment to environment protection and conservation of non-renewable energy sources,

Maruti awarded the ISO 14001 Certificate for its Environment Management Systems at the

Gurgaon Plant. The ISO 14001 certification is applicable to all its manufacturing activities,

products and services.

Maruti has a state of art rain water harvesting system, water treatment plant and waste

management system at Gurgaon plant. Maruti also received prestigious Golden peacock

award in 2007 for its environment Management Efforts.

Energy Conservation at Maruti:

Maruti recognized importance of energy and formulated following 4-point action plan.

1. Use renewable energy

2. Eliminate wastage

3. Improve Energy efficiency

4. Improve process efficiency with automation

Use renewable energy:


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Eliminate wastage:

Waste Heat recovery Boiler Steam turbine driven compressor Steam condenser

Saving of 4225 Mwh per year by eliminating need of 785KW motor

Improve Energy Efficiency:

Improve Process Efficiency with Automation:


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Results of These Efforts:

Future Ahead

Challenges:

a) Consumer Sentiments: We are yet to get over to the after-effects of Subprime crisisand now struck with Euro debt crisis. The world economy will take some time to

regain the confidence and so the export and domestic demand is affected to some

extent.

b) Inflation: The ever rising inflation is a big concern for companies like Marutibecause their product segment falls in luxury category for majority of the population.

With rise in inflation, net disposable income will decrease and so will demand.

c) Interest Rate: Government is raising the interest rates to counter the effect ofInflation but that increases the borrowing rates => Low ability to borrow=> Low

demand

d) Competition: The small car segment is highly competitive and global players arecoming to make money by increasing value propositions => Low profit margin


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e) Volatility: The volatile prices of steel and crude oil are hitting both, demand as wellas supply side of Car market.

Recommendations:

a) Inward specialization: Car model like A-Star has seen a significant rise in domesticdemand because of its low emissions, light weight and high fuel efficiency. Maruti

should exploit such opportunities at earliest.

b) Outward looking approach: Maruti should focus on its car models which are morestrategic to world market. Maruti Splash is a possible solution to that demand which

uses KB engine and petrol-diesel variant.

c) Image Building:Maruti is known as Poor Mens car, this image should be changedby diversifying the product offerings. The middle class explosion of India supports

the price level of 8-12 Lacs for car, comfortably. Therefore, SUVs and MUVs like

Grand Vitara should gain attention.

d) R&D:Investments in research and product development will help Maruti in long termby delivering values to customers in terms of cost effectiveness and comfort.

e) Social Responsibilities: Our study shows that the company which is visible in societyfor its commitments lasts longer than others. So, Maruti should focus in this area. The

next market for Maruti would be rural areas where our direct competition would be

from TATA Nano; therefore its important to build a responsible image to capture the

share.


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Projected Valuation Summary

As on 31 Mar (in million Rs) FY09 FY10 FY11 Exp. FY12 Exp.

Revenues 2,09,129 2,96,230 3,30,977 3,77,166

yoy growth (%) 17.1 41.6 11.7 14

Operating profit 18,701 39,543 38,559 42,677

OPM (%) 8.9 13.3 11.6 11.3

Reported PAT 12,191 24,976 25,254 26,865

yoy growth (%) -29.6 104.9 1.1 6.4

EPS (Rs) 42.2 86.4 87.4 93

P/E (x) 32.2 15.7 15.5 14.6

Price/Book (x) 4.2 3.4 2.8 2.4

EV/EBITDA (x) 20.3 9.4 9.7 8.7

Appendix

Financial Performance:


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Market Share:


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Customer Satisfaction:

Services Offered:

References

www.marutisuzuki.com

www.maruti.co.in

www.wikipedia.org

www.scholar.google.com
http://www.marutisuzuki.com/http://www.marutisuzuki.com/http://www.maruti.co.in/http://www.maruti.co.in/http://www.wikipedia.org/http://www.wikipedia.org/http://www.scholar.google.com/http://www.scholar.google.com/http://www.scholar.google.com/http://www.wikipedia.org/http://www.maruti.co.in/http://www.marutisuzuki.com/

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