ITM BUSINESS SCHOOL PGDM

(Batch 2011-13)

BUSINESS POLICY AND SRATEGIC MANAGEMENT

SHRADHA KULKARNI (52) SHUBHAM GOYAL (58) ROSHAN VAILAYA (64) SOURABH CHOPRA (71) RAHUL HEDAU (73)

GROUP 3 BATCH - Finance 2

A Project Report On Maruti Suzuki Ltd.

TABLE OF CONTENT
SR. NO. 1 2 3 4 5 6 7 8 9 10 11 12 Executive Summary Define the Industry Portfolio Analysis of Industry Attractiveness of Industry Value Chain of Maruti Suzuki Porters generic Strategy Added Value Concept Cost Component Willingness to Pay Component Overcome the Threats Scope of Further Growth of Company Conclusion and Learning SECTION PAGE NO. 2 2 4 5 6 8 9 10 11 12 12 13

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1. EXECUTIVE SUMMARY
Maruti Suzuki a leading car maker in India is a subsidiary of Suzuki Motor Corporation of Japan. Maruti is a market leader in mid-size segment of cars and has a market share of around 42% in mid-size segment cars. Best selling cars of Maruti include Swift, Swift Dzire, Alto, and Ertiga. They have production on economies of scale and works on cost effectiveness. Maruti has manufacturing plant in Manesar and Gurgaon and they are coming up with plant in Gujarat to make India a hub for mid-size cars. They also have a research and design center at Haryana. Maruti Belongs to an Automobile Industry which has tough competition from other major players after liberalization when companies like Hyundai, Honda, Skoda, Toyota, Volkswagen have started selling cars in India. The core competencies of Maruti include strong customer base and brand image, well developed sales and service network and strong knowledge of Indian markets. Analysis based on BCG matrix and GE matrix is also performed in order to understand brand marketing and product management to help a company decide what products to add to its product portfolio, and which market opportunities are worthy of continued investment. Attractiveness of the Industry is analyzed through Porters Five forces and also Value Chain to get idea about how the operational activities and production activities are performed in compliance to have cutting market competition. Porter Generic strategy to understand about cost, differentiation and focus strategy and the added value so that customer can differentiate Maruti product with the other leading companys product and its competitive advantage. Marutis leadership is market is due to its cost advantage which is least among all the other players in market and its lower maintenance cost. The willingness to pay is also very high because customers can easily pay required cost because they are getting what they are expecting and also cost is low. Maruti has threat from imitations, Substitute, slack and Holdup which has proven problems for the company in recent past but still they had overcome them to prove there cost leadership and market leader. Further companies future growth and prospects is discussed to get clear picture how companies expands and which new products company is launching to maintain and retain market share.

2. DEFINE THE INDUSTRY

Maruti Suzuki India Limited is a subsidiary company of Japanese automaker Suzuki Motor Corporation. It has a market share of 42.1% of the Indian passenger car market as of March 2012. Maruti Suzuki offers a complete range of cars from entry level Maruti 800 and Alto, to
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hatchback Ritz, A-Star, Swift, Wagon-R, Estillo and sedans Dzire, SX4, in the 'C' segment Maruti Eeco, Multi-Purpose vehicle Ertiga and Sports Utility vehicle Grand Vitara. 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.

INDIAN AUTO INDUSTRY

One of the major industrial sectors in India is the automobile sector. Subsequent to the liberalization, the automobile sector has been aptly described as the sunrise sector of the Indian economy as this sector has witnessed tremendous growth. The Indian auto industry is showing signs of slowdown. Utility vehicles are growing strong, clocking 53% growth over last year. The cumulative production data for April-July 2012 shows production growth of 7.10% over same period last year. The industry produced 1,746,840 vehicles in July 2012 as against 1,656,014 in July 2011. The overall growth in domestic sales during the period was 9.34% over same period last year. Passenger Vehicles segment grew 10.20% during April-July 2012 over same period last year. Passenger cars grew 5.5% while utility vehicles grew 53.66% during April-July 2012 as compared to same period last year. During April-July 2012 overall automobile exports registered negative growth at (-4.03) percent. While passenger vehicles and commercial vehicles both grew by 9.14 percent. Two & three wheelers declined by (-1.00) and (39.23) percent respectively in AprilJuly 2012 compared to the same period last year.

MARUTI SUZUKI GROWTH ANALYSIS

Maruti Suzuki India Limited logged 9.2 percent increase in sales for July 2012 at 82,234 units as against 75,300 units in the same month last year, riding back on the humungous sales of its compact sedan, Swift Dzire, clocking an almost four-fold increase, according to a company statement. According to the carmaker, its domestic sales during July stood at 71,024 units, compared to 66,504 units in July last year, up 6.8 percent. The sales were driven mostly by its compact sedan Dzire, which clocked 11,413 units. Sales of small cars, including the M800, Alto, A-Star and Wagon R, however, declined by 23.7 percent to 28,998 units. The company's other best-selling model Swift along with Estillo and Ritz together clocked 15,759 units in July this year, up 73.2 percent from last year. MSIL's sales of its mid-sized sedan SX4 plunged by 70.5 percent to just 679 units in the month, the company said in a statement, adding that it managed to sell just two units of the luxury Kizashi sedan. Exports during the month stood at 11,210 as compared to 8,796 in July last year, up 27.4 percent.

CURRENT STRATEGIES OF MSIL

A. Focus on small market segment to beat the stiff competition. B. Develop capabilities & internal resources to finance its expansion and growth.
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C. To stay away from ultra-low cost segment. D. To make India an exclusive small car manufacturing base to leverage frugal engineering. E. To establish R&D facility in India to produce cars in India, starting from design till production

CORE COMPETENCIES OF MSIL:

Core competencies of an organization can be simply defined as a set of qualities, which are unique to that particular organization that cannot be easily imitated by its competitors. Core competencies are factors which give competitive advantage to the organization in its chosen market. Core competencies may be of various types- technical know-how, relationship with customers, employee-dedication, manufacturing process etc. An analysis of the Maruti Suzuki India Ltd. shows three core competencies: 1. Strong Customer Base & Brand image The MSIL has a market share of about 55% in the Indian passenger car segment and is the largest manufacturer of small cars in India. The company has been voted as first by Indian customers for level of customer service and customer satisfaction. The company manufactures affordable small cars which serve the needs of an average Indian customer faithfully and hence have a strong brand image as the common mans car in India, which an average Indian customer identifies with. Such a strong brand image and huge customer base can sustain the position of the company as the market leader in the Indian small car segment. 2. Well-developed sales and service network throughout India The Maruti Suzuki India has a strong dealership network comprising more than 450 cities across India and a huge service network of more 2750 franchises of service outlets spreading about 1300 cities throughout India. Such a widely distributed sales and service network can help the company to relate with its customers across India and also facilitates bargaining power with suppliers and increase profitability. 3. Very Strong knowledge of Indian market The Maruti Suzuki India has a strong knowledge of the Indian market which has helped them to grow their sales and market share in India.

3. PORTFOLIO ANALYSIS OF THE COMPANY

BCG Matrix for MSIL
Maruti Suzuki, one of Indias leading automobile manufacturer and the market leader in the car segment, both in terms of volume of vehicles sold and revenue earned.

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STAR: The Company has long run opportunity for growth and profitability. They have high relative market share and high growth rate. SWIFT, SWIFT DEZIRE AND ZEN ESTILO is the fast growing and has potential to gain substantial profit in the market. QUESTION MARK: These are also called as wild cats that are new products with potential for success but there cash needs are high and cash generation is low. MARUTI SX4, GRAND VITARA, RITZ fall in the category of question mark CASH COW: It has high relative market share but compete in low growth rate as they generate cash in excess of their needs. ALTO AND WAGNOR have fallen to ladder 3 & 4 due to introduction of ZEN ESTALIO and A STAR. DOG: The dogs have no market share and do not have potential to bring in much cash. Business of SX4, OMINI, and VERSA has liquidated and trim down.

GE MATRIX OF MSIL
The GE matrix is an alternative technique used in brand marketing and product management to help a company decide what product(s) to add to its product portfolio, and which market opportunities are worthy of continued investment.

GE MATRIX HIGH HIGH BUSINESS STRENGTH

INDUSTRY ATTRACTIVENESS MEDIUM

Investment & Investment & growth growth SWIFT ALTO Investment & Selectivity/earnings growth SWIFT SX4 DEZIRE Selectivity/ earnings WAGON R Harvest VERSA

LOW Selectivity/ earnings ASTAR Harvest ECO

MEDIUM

LOW

Harvest OMNI

4. ATTRACTIVENESS OF THE INDUSTRY

PORTERS FIVE FORCES MODEL
Michael Porter identified 5 forces that determined the long run attractiveness of a business. We would analyze Porters five forces in context of the Maruti Suzuki.

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a) Threat of New Entrants: Increasing Although most of the major global players are present in the Indian market; few more are expected to enter due to the welcoming government policies and expected retaliation. b) Threat of Substitutes: Low to Medium Maruti Suzuki faces serious threat from consumer shifting to hybrid or electric cars. Currently, the electric car market in India is dominated by sole player Reva Electric Car Company. However brands like Tata Motors, Chevrolet and Nissan are also planning to launch their electric car this year. c) Bargaining power of Supplier: Low Automakers are the key to the supply chain of the automotive industry. Maruti Suzuki has manufacturing units where engines are manufactured and parts supplied by first tier suppliers and second tier suppliers are assembled. There are a large number of automobile component suppliers whose switching costs are very high. Thus reducing the bargaining power of the suppliers d) Bargaining power of buyers: Increasing Today, consumers are considered kings in the automobile market. There is an increasing awareness among them and they are given a humongous number of choices. Buyers get incentives in the form of cost discounts and better after sales services. This further increases the bargaining power of the buyers. e) Competitive Rivalry: High Competition in certain segments is very high e.g., small and mid-car segment. Brands like Hyundai, Chevrolet, Tata and Skoda have given huge competition to Maruti Suzuki. In the recent past Volkswagen, Honda, Ford has also given competition to the premium car segment.

5. VALUE CHAIN OF MARUTI SUZUKI

Porter distinguishes between primary activities and support activities. Primary activities are directly concerned with the creation or delivery of a product or service i.e. operational. Each
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of these primary activities is linked to support activities which help to improve their effectiveness or efficiency.

(A) Primary activities at Maruti Suzuki (Operational)

1) Inbound Logistics Inbound Logistics i.e. the receiving and warehousing of raw materials, and their distributio n to manufacturing. Maruti Suzukis inputs primarily comprise raw materials and purchased components. Raw material i ncludes rubber, glass, steel, plastic, aluminum. Tyre, windshields, and airbags are example of parts or compo nents. The company has implemented tierization of suppl iers and Just in Time supply logistics. 2) Operat ions Transform i nputs i nto final product form through machi ning, packaging, assembly, equipment maintenance, testing, printing and facility operations. 3) Outbound Logistics Are the activities required to get the finished product to the customer, including collecting, storing, physically distributing, material handling, delivery vehicle operation, order processing and scheduling. 4) Market ing and Sales Provide means by which buyers can purchase the product and inducing them to do so, such as advertising, promotion, sales force, quoting, channel selection, channel relations, and pricing. Marutis marketing objective is to continually offer the customer new products and services that: 1. Reduce the customers cost of ownership of our cars; and 2. Anticipate and address the customers needs and preferences in all aspects and stages of car ownership (MARUTI SUZUKI refers to this as the 360 degree customer experience 5) Service Aims to enhance or maintain the value of the product, such as installation, repair, training, parts supply, and product adjustment

(B)Secondary activities at Maruti Suzuki (Supportive)

1) Procurement The function of purchasing raw materials and other inputs used in the firms value creating activities
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2) Technology Development Technology development includes research and development, process automation, and other technology development used to support the value chain. a) Research & Development (R&D) b) Technology absorption, adaptation and innovation 3) Human Resource Management Activities associated with recruiting, training, development and compensation of employees. 4) Firm Infrastructure Firm infrastructure consists of general management, planning, finance, accounting, legal, government affairs and quality management. Kaizen - Maruti had adopted the Japanese management concept of Kaizen, or continuous improvement. The Kaizen activities had resulted in the improvement of the in-house capabilities. For example, they had manufactured 25 multi-axis robots and 16 multi-spot welders.

6. PORTERS GENERIC STRATEGY

The Low Cost Maintenance Advantage The Acquisition Cost Is Unfortunately Not The Only Cost You Face When Buying A Car. Although a Car May Be Affordable To Buy, It May Not Necessarily Be Affordable To Maintain, As Some Of Its Regularly Used Spare Parts May Be Priced Quite Steeply. Not So In The Case Of a Maruti Suzuki. It Is In The Economy Segment That The Affordability Of Spares Is Most Competitive, And It Is Here Where Maruti Suzuki Shines. Lowest Cost of Ownership The Highest Satisfaction Ratings With Regard To Cost of Ownership among All Models Are All Maruti Suzuki Vehicles: Estillo, Wagon R, Esteem, Alto and Omni. We Are Proud to Have the Lowest Cost of Operation/Km (Among Petrol Vehicles) - The Top 5 models Are All Maruti Suzuki Models: Maruti 800, Alto, Zen, Omni and Wagon R.
To achieve cost leadership --- upfront capital investment in state-of-the art equipment/plant is required. e.g. --- Maruti Suzuki has two state-of-the-art manufacturing facilities in India. The first facility is at Gurgaon spread over 300 acres and the other facility is at Manesar, spread over 600 acres in North India. Maruti Suzuki's facility in Gurgaon houses three fully integrated plants. Together the three plants have an installed capacity of around 700,000 units. K Series Plant. The Gurgaon facilities also house the K Engine Plant. Commissioned in 2008, the K-series engine plant has an installed capacity of 500,000 units. Manesar Facility At present the Manesar plant rolls out

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World Strategic Models Swift, A-star, SX4 and swift Dzire. The plant at Manesar is the company's fourth car assembly plant and has a capacity of 300,000 cars per year. Differentiation - creating something that is perceived industry wide as unique. Differentiation can take many forms - Brand name- Maruti Suzuki Technology- The highly fuel efficient, technologically advanced K series engines have been very well appreciated by our customers for their performance. Service- Best Service/highest no. of service centers Dealer Network Highest Quality- Value for money Performance Mileage Best match with Indian road conditions Less Maintenance cost Resale price

7. ADDED VALUE CONCEPT

The Quality Advantage Maruti Suzuki Owners Experience Fewer Problems With Their Vehicles Than Any Other Car Manufacturer In India. The Alto Was Chosen No.1 In The premium Compact Car Segment across 9 Parameters. Wagon R No. 1 in the premium compact car Segment and SWIFT as best hatch back car. This study measures owner In terms of design, content, layout and performance of vehicles across various 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 Customers in finding the right Car. The high sales and customer care standards led us to achieve the no.1 name. Quality Service across 1036 Cities 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. About 92% of Maruti Suzuki owners feel that work gets done right the first time during service and 97% of Maruti Suzuki owners would probably recommend the same make of vehicle, while 90% owners would probably repurchase the same make of vehicle. One Stop Shop At Maruti Suzuki, you will find your entire car related needs met under one roof. Whether it is easy finance, insurance, fleet management services, exchange- Maruti Suzuki is set to provide a single-window solution for all your car related needs.

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8. COST COMPONENTS
The cost components are basically the group of cost origins for the organization. Cost Components of any Automobile Company like Maruti Suzuki include Prime Cost, Works Cost, and Cost of production and Total Cost. Prime Cost It consists of costs of direct material, direct labour and direct expense specifically attributable to the job. This is also known as flat, direct or basic cost. Costs involved in this are the main costs with the help of which the core products that the company is indulged in are produced. Egg.:- costs in procuring raw materials for production of the cars, payment to labour involved in production activities etc. Works Cost It comprises of prime cost and factory overheads, (cost of indirect material, indirect labour and indirect expenses related to factory works). This cost is also known as factory cost, production or manufacturing cost. Costs involved in this are Complementary to the Prime costs of the business and includes those things which directly doesnt involve in production of the goods. Egg.:- Payment of wages to employees such as supervisors, guards etc. Cost of Production It is the sum total of works cost and office and administrative overheads (Cost of indirect material, indirect labour and indirect expenses related to office works). This cost is known as office cost. Costs involved in this are the Office and Administrative Expenses i.e. the salaries of the office employees and managers. Improvement in Cost Component Prime Cost component is the one which can be improved and is the one on which the company is taking steps to improve because of the foreign exchange fluctuations and higher input costs. The company has initiated measures to step up localization levels and to pare the number of tier-I suppliers over the next two-three years, cutting down component imports, improving yield and enhancing the usage of raw materials. Consolidating its supplier base to increase sourcing from a smaller and more stable base of tier-I vendors to bring down logistics costs and to leverage economies of scale while inking sourcing pacts. Maruti Suzuki sources 10 per cent of components directly from foreign markets, while another 15 per cent are imported by its vendors. To reduce exposure to forex fluctuations, the company has decided to cut direct and indirect imports of components by half over the next three years.
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9. WILLINGNESS TO PAY
Customers prefer and give value to the convenience provided by one stop shopping as it gives broad scope. It gives the customer the experience of one single point of contact for sales service and other support which they can provide. Maruti Suzuki is providing the same with so many features mentioned below:

Offering one shop stop:

In one shop stop you get many thing at one place, this is a growing trend among the automobile industry: Maruti Finance: In a market where more than 80% of cars are financed, Maruti has strategically entered into this and has successfully created a revenue stream for Maruti. This has been found to be a major driver in converting a Maruti car sale in certain cases. Finance is one of the major decision drivers in car purchase. Maruti has tied up with 8 finance companies to form a consortium. This consortium comprises Citicorp Maruti, Maruti Countrywide, ICICI Bank, HDFC Bank, Kotak Mahindra, Sundaram Finance, Bank of Punjab and IndusInd Bank Ltd. (erstwhile-Ashok Leyland Finance). Maruti Insurance: Insurance being a major concern of car owners. Maruti has brought all car insurance needs under one roof. Maruti has tied up with National Insurance Company, Bajaj Allianz, New India Assurance and Royal 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. Customize the vehicles: Customize the wheel and the colour of the car. True Value: Providing customers with second hand vehicles for purchase with the assurance of Maruti and warranty and guarantee by the company itself for few years. Maruti Driving School (MDS): Maruti has established this with the goal to capture the market where there is inhibition in buying cars due to inability to drive the car. This brings that customer to Maruti showroom and Maruti ends up creating a customer.

10. THREATS OF SUBSTITUTION

Imitation It refers to struggle for existence. Use of high grade plastics in areas like door trims, fuel hoses, and fuel railings etc., and new light-weight 6-layer polymer fuel tank helps
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Maruti Suzuki to reducing the weight of the vehicle and cost which enables the company to achieve the economies of scale. Maruti Brand loyalty is very high in small cars so, it very difficult for the competitor to imitated the brand loyalty and customer satisfaction. Substitution - The threat of substitution is medium, there are various substitution product of Maruti like bus, trains, aircraft etc. and also company facing a competition from Chinese car. Hyundai, Nissan has come up with really impressive cars to challenge the dominance of Maruti. To response this and maintain its dominance in small segment, the Maruti announces WagonR r and Alto 800 in the year 2012-2013. Hold up It refers to delays in you delivering your service or product at the specified price and time. Recently, Maruti Swift runs out of stock because the company is not expected to revive production at the violence-hit Manesar plant, its sole manufacturing facility. This will likely to further increase the waiting period for customers, affect suppliers dependent on the car, and hit sales. It will lead the competitors like Hyundai, may get additional customers for its launched i20 hatchback. Tata Motors may also witness higher demand for its IndigoIndica range in coming months. Slack - The silent killer of small business, theft, absenteeism, non-engagement and waste or ineffective use of current resources. The companies facing a problem of innovation because company is still focus on old cars and upgraded models

11. SCOPE OF FUTURE GROWTH OF MARUTI SUZUKI

The companys network of sales and services outlets continues to be its strength. Network is set to expand in the future and it will help to tap opportunities in the country. Manesar Plant reopens under full security of employees MSIL to fast track its New alto launch which is priced about 2 lakhs, Suzuki making MSIL a small car manufacturing hub, Volume growth of 10.8% for FY2012 Company facing slowdown as the demand environment is impacted Share in diesel vehicle is 38% during 1st quarter FY13 Net sales grew by 27.5% yoy to Rs.10,778cr in 1st quarter FY13, EPS Estimates to be INR 66.87 and ROE of 12.1% for FY2013, Expected significant volume growth of 15% for FY13 Coming up with new plant and Skill development center in Gujarat and R&D center in Haryana

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12. CONCLUSION AND LEARNING

A detail analysis on the business of Maruti Suzuki is done based on the various theories laid down under business strategy. The analysis included applying various concepts and theories which include Porters five forces to understand portfolio analysis, value chain of the company, cost component, willingness to pay and growth prospects of the company in near future. It can be concluded that Maruti Suzuki is expanding its product basket by offering value (swift, sx4) at different income level. Maruti Suzuki stands for value as much as it stands for performance. In spite of rising input costs, Maruti Suzuki always tries to provide cars at reasonable cost. Their running costs and resale values are unbeatable too. This enabled Maruti to become Market leader. Suzuki gaining globally on back of small car portfolio. Economies of Scale make India attractive destination for Maruti Suzuki. With the passenger car sales over spiraling fuel prices and high interest rates, Indias largest car manufacturer, Maruti Suzuki India, is working on customer specific marketing strategy to increase its sales among the first time buyers. The company have maximum 47 per cent market share among the first time buyers. Maruti Suzuki is far behind in luxury and SUV car, the other player like GM, TATA, Mahindra, Honda and Toyota are already established in the market, so replacing them would not be easy Learning can be put as understanding of various theories of business strategy and practically using them to comprehend on economic, industry and financial details.

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