Company Analysis of Maruti Suzuki

By, Pavan Subhash Tirumalasetti PGP (2012-14) Indian Institute of Management Raipur

Introduction:
Maruti Suzuki is a subsidiary company of Japanese automaker Suzuki Motor Corporation. Initially it was called as Maruti Udyog Limited (MUL), which was established in Feb 1981 through the act of parliament. The main objective behind its inception was to meet the growing demand of personal means of transport caused due to the lack of efficient public transport system. It has a market share of 44.9% in passenger car market as of March 2011. Maruti Suzuki offers a complete range of car starting from Entry Level, Hatchbacks to sedans and Sport Utility vehicles (SUV). It was the first company in India to mass-produce and sell more than a million cars, In February, 2012 it sold 10th million vehicle in India. Maruti Suzuki has two manufacturing facilities in India: Gurgoan and Manesar. Both manufacturing facilities combined have an production capacity of 14,50,000 vehicles annually. During a recent meeting with Narendra Modi, Gujarat Chief Minister, The chairman of Suzuki Motor Corporation said that the work to establish a manufacturing unit in Gujarat would be started soon. Maruti Suzuki has 933 dealerships across 669 towns and cities in India. It has 2,946 service stations in 1,395 towns throughout India. It has 30 Express Service Stations on 30 National Highways across 1,314 cities in India. Major revenue comes from these service stations; Other Automaker giants in India were unable to reach this benchmark setup by Maruti Suzuki. Maruti Suzuki launched its first car Maruti800 on December 18, 1983, followed by other models like Gypsy etc. MUL became a market leader holding a major market share. But, it depended mainly on Maruti800, So in late 1990s new global players like Daewoo Matiz, Hyundai Santro entered the market with more space and comfort, at same price, then market lost a major share of the market. To gain back its market share Maruti launched models like Zen, Alto, WagonR. These models gained ahuge response from consumers. Maruti Launched Alto800 in October, 2012 which is receiving tremendous response from the market. Its Core Competencies are Post sale service, Mileage, Maruti Insurance, Maruti Finance.

Companys Product Portfolio:

The company offers a portfolio of 14 brands, ranging from the peoples car, Maruti800, to the luxury sedan, Kizashi. It must be thinking to restructure its product portfolio in the Indian market in the

current circumstances of dip in market share because of foreign players like Honda, Volkswagen, Skoda entered into small car segment with Brio, Polo, Fabia respectively . With the current growth in Indian economy and increased exposure to global market, consumer are very conscious about reliability, post sale service, mileage, style, comfort, price as well. They are expecting a mode of transport which satisfies all the above stated features in an affordable price range. Since, Maruti Suzuki has positioned itself as a company that offers a Total Value Proposition (TVP) to its customers. So, it is going to be challenging for Maruti Suzuki to manage its very old brand name peoples car (affordable price and maintenance) competitors. Maruti Suzuki Portfolio by offering attractive models like its

Maruti800 (A1 <3400mm)

Alto (A2 3401-4000mm)

Estilo (A2 3401-4000mm)

Wagnor (A2 3401-4000mm)

A- Star (A2 3401-4000mm)

Ritz (A2 3401-4000mm)

Swift (A2 3401-4000mm)

Dzire (A3 4001 4500mm)

Sx4 (A3 4001 4500mm)

Kizashi (A4 4501 4700mm) Ertiga (Life Utility Vehicle)

Grand Vitara (Multi Utiity Vehicle)

Gypsy (Multi Utility Vehicle)

Omni (Multi Purpose Vehicle)

Eeco (Multi Purpose Vehicle)

From the above set of products we can see that Maruti800 as the Traffic Master, Grand vitara as the Prestige Builder. A-star aspires to become the Flagship Product of Maruti Suzuki after Alto and WagonR. In 1990 Maruti Suzuki Introduced Maruti1000, Maruti Esteem an upgraded version to

Maruti1000 was launched in 1994. Maruti1000 is in production till 2000, but later it was taken out of market due to sales. Esteem was in market till 2007 later it was replaced by Swift DZire. Due to the launch of Esteem, Maruti1000 lost its market share this can be termed as Product Cannibalisation. Maruti-Suzuki's launch of Suzuki Alto in the same sub-category as Maruti 800, which was the leader of the small-car segment to counter the competition from Hyundai is seen to be a classic case of cannibalization strategy. In the year 2000 Maruti Suzuki launched Alto. This product price was between Maruti 800 and Maruti Zen. Here company was trying to fill the gap existed in the segment by introducing ALTO i.e. line filling. Subsequently, company had deleted some of its failure products, Line Deletion, and launched them with some upgrades. Maruti Suzukis leadership in small car segment is undisputable, but company has failed to grab high end (i.e. price range above 5 lakhs) market. For example, Maruti so far launched sedans like Baleno, DZire, SX4, Kizashi above that price range, among them only DZire became successful. This clearly shows that Maruti has been perceived as small car manufacturer only.

The Ansoff Matrix of Maruti Suzuki is as follows:

Existing Products New Products

Existing Markets

Maruti800, Alto, WagnoR, Gypsy (Market Penetration)

Alto800, Maruti TrueValue, Maruti Finance. (Product Development)

New Market s

Poland, Hungary, Indonesia, and Algeria. (Market Development)

NA (Diversification)

From the above matrix we can see that Maruti has offered new products like Maruti True value, Maruti Finance, Maruti Insurance etc. to its existing markets. These services are offered to only Maruti cars, where Maruti competitors literally failed to implement and follow. In addition, Maruti exporting its passenger cars to many developing countries like Latin America and Asia, Maruti800 which was so popular in Indian market is no longer as it used to be. But, this small car is now attracting African markets. In 2012 over 4,600 units were shipped to Algeria alone. It has started shipping out sedan DZire to Africa. Apart from the Maruti 800, it also sells small cars such as the Alto, the Alto K10 and the A-Star there. Large markets in the continent are Algeria, Angola, Mozambique, Nigeria and Egypt. The company has a similar story to tell of Latin America, where it has grown sales fourfold to 21,000 units over the past four years. Unfortunately or fortunately Maruti Suzuki restrained from experimenting new products.

BCG Matrix of Maruti Suzuki can be shown as follows:

M A R K E T S H A R E M A

STAR
R

DZire, Swift, Estilo

K E T G R O W T H

?
SX4, Vitara, Kizashi

Cash Cows Alto, 800, WagonR

Dogs Baleno, Maruti 1000, Omni, Versa.

STAR: These products have large market share as well as high market growth; the company has high

growth rate and profitability. Company earns large revenue from these products.

Question Mark: Products in this category has high growth but low market share. Company needs to put some effort to convert these into STAR category products; they have potential to become successful. Cash Cows: Products in this category has high market share but without any further growth. So, company needs to invest revenues earned, from Cash Cows, into question mark category. Dogs: These products have neither of them. So, it is better to liquidate those products. The market strategy for this particular type is harvest, divest and drop.

Pricing and STP:

Maruti Suzuki has 16 products in its current portfolio. Following table shows the price ranges of each product. We can observe that Maruti has offered most of its products in the price range of 21,00,000 to 5,50,000 Rs.( Lowest Price ), Whereas, Maruti has very few products above the price of 1 Million Rupees. Model Maruti800 Alto800 Estilo A-Star Omni Gypsy Eeco Grand Vitara Alto K10 Ritz WagnoR Swift SX4 DZire Ertiga Kizashi Lowest Price(Rs) 217760.32 282914.67 359539.61 393461.49 235546.17 571032.82 324362.81 2394953.00 327606.99 445948.04 369767.41 463718.70 750079.14 497464.71 624722.24 1699171.00 Highest Price(Rs) 242884.58 366907.75 445425.29 476395.97 273445.22 624125.32 422888.60 2594757.00 344365.78 646300.41 455360.71 704028.94 982356.71 752948.70 904186.50 1800758.00

Maruti Suzuki offers EMI facility for many its products, even for Alto800. It offers exclusive discount rates to customers during festival period and particular group of customers like government employees. To promote its bottom line growth Maruti has launched Maruti Finance in 2002. Prior to start off own finance, Maruti has two joint venture with Citigroup and GE. In addition, it has tied up with many banks like ABN Amro, HDFC Bank, ICICI Limited, Kotak Mahindra Bank etc. 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 India.

Maruti Suzuki has adopted a focused approach and wisely created segments within a large market to promote their cars. Lower Income Group: 800, Alto Middle Income Group: WagonR, Ritz, Swift, DZire, SX4. High Income Group: Kizashi, Vitara. Even Maruti has different target markets and positioning strategies for different products, as a whole it is positioned as affordable car with good post sale benefits compared to its rivals.

Promotion Strategies:
Involvement and Motivation are the two important dimensions need to consider understanding how purchase decisions are made, for that one can use Rossiter Percy Grid. The RPG uses awareness as necessary condition for the effectiveness of advertising. Awareness about the brand creates brand attitude, to create positive brand/product attitude one has to be aware of the king of decision involved in purchasing. With low involvement decisions, to initiate positive attitude the target audience need only pay attention to and learn something about the brand. Whereas, with high involvement decisions to initiate the positive attitude the target audience not only needs to pay attention and learn something about the brand but also they should believe what is said. Generally, cars come under high involvement product because of the perceived risk involved in purchasing the product. Let us analyse Maruti Suzuki promotion campaigns using RPG: The following shown is the Rossiter Percy Grid: Rossiter Percy Grid Informational (Negative) Transformational (Positive)

Low Involvement product

Product: Cars Brand: Maruti Suzuki

High involvement product

For most of the people, buying a new car is positively motivated, because a car is such a significant investment, and it likely to be around for a long time, there are number of problems addressed as well: How reliable is it, how much mileage it gives, What about the resale value, what kind of service is provided. The primary motivation here is one should like the brand and particular model before even consider it for purchase. In addition, somewhere in the campaign we need to provide believable information in order to satisfy the secondary motivation that is target audience likes. Principle to be followed while implementing high involvement transformational brand attitude strategies: 1. Dual motivation could also be needed. 2. Elicit the correct emotional response and link to the brand 3. Be certain that is emotionally authentic. 4. Target audience must personally identify the brand as it is portrayed in the execution. 5. Liking must go beyond the execution and extend specifically to brand and product. Now let us compare the principle to Maruti Suzuki Ad campaigns. Maruti Suzuki promotes its products mainly through TV Ads and Print media. Every product name has a meaning which communicates its offering, for instance Ritz means Ostentatious luxury and glamour, Swift means happening quickly or promptly. Along with the new product launch it tags a punch line to that product, detailed analysis is given below: Maruti800:

Change your Life

Maruti800 targeted low income group family customers and it is positioned as peoples car, which is why no matter how many times company has explicitly announced that they are deleting Maruti800 from their product line but still it can do so because of the demand. In its Ad campaign Change your Life, it was shown that a particular familys life style had changed after owning a Maruti800. In this campaign we can see a mood was created changing ones life and linked it to target audience. Finally, the execution is: For People, with low income, who want to feel the pride of owning a car, Maruti800 is the product. If we observe all the principles are followed, emotional response is created and linked it to the brand, however, it is believable.

A Star: Stop @ Nothing The unique selling proposition of this product is fuel efficient car with high mileage. It is positioned as compact car for the owners who do not want to stop at anything. In this Ad campaign, mood that was created is, people feel who owns this feel so independent and confident so that they do not want to stop at anything. Likewise we can analyse all the product promotion campaigns using RPG grid. I have provided brief description of few Ad campaigns: Alto: Lets Go Alto is a great combination of economy, practicality, styling in an affordable price range. Its upgraded model Alto k10 has some changes in the interior design. Alto is one of the most selling cars in India and globally. In its campaign Lets Go, company never showed a child with the couple, from this we can infer that it is targeted towards newly married couple. And it is positioned as Indias most fuel efficient car. Estilo: Take a fresh view of life With its aerodynamic contours and smooth curves, the Estilo is a perfect combination of sturdiness and class. WagnoR: For the smarter race Based on a new platform, the all-new WagonR is the tallest in its class and has a distinct sloping stance. USP of this product is safety features for compact car suited to Indian roads. It is mainly targeted towards Middle level income groups. Ritz: Live the moment Unique selling proposition of this product is luxurious look in small car segment. Its Ad campaign shows that it is a car that keeps you calm and comfortable. Maruti SX4: Men are back A premium sedan with an affordable price compared to its competitors. It is positioned as for the men who want to control the road.

Maruti Swift DZire: The heart car Luxurious car from Maruti, which requires low maintenance. The DZire is a car that has everything one can desire. Maruti Swift: You are the fuel It is positioned as the car which is powered by the person who is driving. In addition to Tv and Print media promotion, It also promotes its products through tradeshows, Automobile exhibitions and exhibition in shopping malls.

Place:
Maruti Suzuki is known for its distribution network. It has around 900 outlets across the country. Maruti plans to buy 12 prime properties across the metros as it have already built 5 on its own and handed over to distributors. This is a major shift in the traditional model where Maruti use to outsource the distribution to franchisee. The desire to transform from a small car manufacturer to sedan maker may be the main objective behind this change in distribution strategy. In addition, Maruti also offers an extensive service to its customers; in a particular Ad it was shown that child stops crying only when his mother takes him into her hands.

SWOT Analysis:

Strengths
Distribution Network & After sale services Largest market share of 50% It is the first company to start second hand sales through its True Value entity. Strong brand value and huge customer base. Presence across segments.

Weaknesses
Unable to make its mark in upper class segment. Management and workers are not in good sync. Still Kizashi is being imported from Japan. Concentrated only in small car & hatchback segments.

Opportunities

Threats
Entry of foreign players like Honda, Volkswagen, Skoda into small car segments. Increase in Petrol prices. Maruti slightly lost its market share.

Maruti recently entered into foreign market with its models Success of DZire is a good sign to enter into Mid Class Segment. Maruti is going to launch diesel version in 800cc range. Untapped rural market

PESTEL Analysis:

PESTEL analysis is a framework that is used to analyse effect macro

environment factors on Maruti Suzuki Ltd.

Political Implications: Exercise duties were enhanced by 2 % on all types of cars, thus there has
been increase in price of all the cars. This shows that government wants people to use public mode of transport system instead of owning a private car. According to Kriti Parikh Committee, Maruti Suzuki has a high exposure to diesel cars (currently about 25% of domestic portfolio, and estimated at 29%+ for FY13), and the diesel tax can substantially impact our FY13 estimates for Maruti.

Economic Implications: The disposable income of Indian consumers has increased. Even during
the economic slowdown, Maruti Suzuki India on October 3, 2012 said it has hiked prices of its all models by up to Rs 5,250 with immediate effect to offset adverse impact of foreign exchange fluctuation and rising input costs.

Social Implications: With the increase in disposable income among younger generation, owning
a sedan is seen as status symbol. For them social status is seen as an important criterion.

Technological Implications: With the rapid changing technology in automobile industry, every
company is trying to outdo its competitor by introducing new technology. New technology may increases safety or mileage or power of the engine. Young generations are more driven by technologically advanced cars rather than being brand loyal.

Environmental Implications: With the growing demand for eco-friendly cars, it is important for
a company to introduce more electric or LPG/CNG variants.

Legal Implications: It is important for Automobile manufacturers abide to the legal norms like
Motor vehicles Act, 1988. The Act governs emission norms and safety standards in India and consolidates the law pertaining to motor vehicles.

Conclusion:
Maruti Suzuki is the market leader in automobile industry. It has a market share of 44.9% in passenger car segment. It is present across all the segments. As of now Maruti Suzuki has only two sedans, SX4 and Kizashi, in the price range of 9-16 lakhs. So, there is a lot more to concentrate in this segment. Regarding small car segment its present share is 44.9%, we can see that it was slightly losing its share from 55.5% in 2000. So, it is important to stay focussed on this segment as well. In addition, there is a huge untapped rural market in India, Maruti Suzuki firmly believes that the rural India is getting more affluent and is largely unaffected by the recession being faced by the entire world, which provides a tremendous potential to the company to increase its sales there. To achieve this Maruti Suzuki has provided industry visits for sarpanchs, opinion leaders, and appointed sales executives who can converse well in local dialect and influence consumer behaviour. All these efforts have definitely paid off and have seen the contribution of sales in rural India rising from 3.6 per cent in 2007-2008 to 26 per cent in 2011-2012.

References:
www.wikipedia.org Articles.Economictimes.Indiantimes.com www.marutisuzuki.com www.moneycontrol.com www.indialawjournal.com