FORE SCHOOL OF

MANAGEMENT

OPERATIONS MANAGEMENT II

FORE SCHOOL OF
MANAGEMENT
OPERATIONS MANAGEMENT II
Project Report
ON
MARUTI SUZUKI

Submitted to:
Proff. Kaushal Goel
Professor

Fore School of Management

Qutub Institutional Area, New Delhi
Submitted by:
Group 4
Abhishek Goel (231009) Aditya Nagpal (231013)
Anant Aggarwal
(231023) Anupreet Kaur (231030)
Deepankar Anand (231049) Gursimran Singh
(231060)
FMG23-A

OPERATIONS MANAGEMENT II

FORE SCHOOL OF
MANAGEMENT

Date: 23th March 2015

ACKNOWLEDGEMENT

First and foremost, we offer our sincere gratitude to Prof. Kaushal Goel for
giving us this opportunity to work on this project under his guidance. We
are humbled by his constant support and encouragement which helped us
in the realization of this project.
We are humbly grateful to Fore School of Management for providing a
conductive environment for working on this project. We thank Dr. Jitendra
K. Das for providing us an opportunity to be a part of this institute.
Our acknowledgement would be incomplete if we do not honour and
salute our family members, who have always been the source of constant
love, affection and support.

Abhishek Goel
Aditya Nagpal
Anant Aggarwal
Anupreet Kaur
Deepankar Anand
Gursimran Singh

OPERATIONS MANAGEMENT II

FORE SCHOOL OF
MANAGEMENT

CONTENTS
LIST OF FIGURES....................................................................i
EXECUTIVE SUMMARY............................................................ii
MISSION...............................................................................1
INDUSTRY AND COMPETITIVE ANALYSIS..................................1
Passenger Vehicle Industry.....................................................................1
Industry performance for last five years (FY 09 to FY 14)......................3
Growth in demand for Passenger Vehicles Urban v/s Rural....................5
Market share of different manufacturers of Passenger cars in India.......6
PERFORMANCE REVIEW.........................................................6
OBJECTIVE:...........................................................................8
MARKETING STRATEGY..........................................................8
Positioning Statement:............................................................................8
Overall Marketing Strategy.....................................................................8
ACTION PLAN........................................................................9
Product Strategy.....................................................................................9
Points of Differentiation.................................................................................11
Points of Parity............................................................................................... 11
Packaging...................................................................................................... 11
Optional Features.......................................................................................... 11
Warranty........................................................................................................ 11
Product Objectives......................................................................................... 11
Brand Positioning Bulls eye..........................................................................12

OPERATIONS MANAGEMENT II

FORE SCHOOL OF
MANAGEMENT

Distribution Strategy............................................................................12
Pricing Strategy....................................................................................12
Promotional Strategy............................................................................14
MONITORING AND CONTINGENCY PLAN.................................15
PROFIT AND LOSS STATEMENT..............................................17
REFERENCES.......................................................................19
REFERENCS

LIST OF FIGURES
Figure 1: Porters five forces
Figure 2: Market share of Segments of Automobile industry in India
Figure 3: Passenger Vehicles Sales in Units
Figure 4: Passenger Vehicle Growth Rate
Figure 5: Division of Sales of Passenger Vehicles
Figure 6: Projection of Passenger Vehicle Industry for 5 years (units)
Figure 7: Growth in demand for Passenger Vehicles Urban v/s Rural
Figure 8: Market Share of leaders in Passenger Vehicles
Figure 9: Perceptual Map

(1)

EXECUTIVE SUMMARY
This report broadly focuses on the Automobile Industry in India. In this report we
have studied and analyzed the Automobile Industry in India on a broad spectrum
and tried to find a segment where we can place our product which is a compact SUV
from MSIL.
On the following pages, you will find

Mission Statement: We have studied the mission, vision and values of MSIL. Core
competencies of MSIL including strong customer base and brand image, well
developed sales and service network and strong knowledge of Indian market have
helped them to survive the tough competition from players like Hyundai and Honda
post liberalization. The present strategies of MSIL are to make India exclusive car
manufacturing base and carry operations from design till production.

In the second part we have conducted a PESTLE analysis for the automobile
industry in India. Recent initiatives of making India a manufacturing hub with special
emphasis on the automobile industry by reducing excise duty and allowing 100
percent FDI. Easy finance schemes and tax deductions in R&D (Economic), increase
in number of middle class segment and opting for comfortable options (Social),
word class technology by global leaders (Technological), provisions relating to safety
and emissions (Political) and growing concerns of communities and government
towards environment (Environmental) are the various factors that have affected the
automobile industry in India at large. Using porters five forces analysis we have
identified high risk of competitive rivalry and high bargaining power and low threats
of new entrants, substitute products and bargaining power of suppliers.

In the third part we have defined the automobile industry we want to compete in.
The last 5 year sale in passenger vehicles segment (which is 14 percent of total
automobile industry) gives us a CAGR of 5.11%. Due to decrease in excise duty,
reduction in fuel price and new Economic reforms we estimate growth of 10% in
passenger vehicles in the coming years. Report published by KPMG shows a major
growth in demand for passenger vehicle from rural segment, breakup of which is
presented in detail in the report. The market share in passenger cars of MSIL,
Hyundai, M&M, Tata Motors and Honda, according to a report published in
statista.com is 42.08%, 15.18%, 9.15%, 5.59% and 5.36% respectively. Further we
have analyzed the marketing strategy of the competitors in our product segment.
(2)

In SWOT analysis we have derived the opportunities and threats from the PESTLE
analysis and industry review. PESTLE points towards a very high opportunity for the
automobiles sector, especially the established ones, due to the projection of India
becoming 4th largest automobile market and sales of 6 million expected in 2020. At
the same time there is an ample opportunity lying in the development of more fuel
efficient and alternate fuel source technology. But there is also a threat from foreign
giants which are showing increasing sales figures in recent years. FDI of 100 percent
is a major threat to MSIL. We have also studied and presented in details the internal
strengths and weaknesses of MSIL.

In fourth Part we have reviewed the performance of MSIL. It is the only company to
cross 10 million saes mark since its inception and has been ranked no. 1 for 15th
consecutive years in customer satisfaction. The product strategy of Maruti is to
focus on catering the needs of people from lower and middle income groups by
creating products that are unique and valued and it is attaining advantage either
through differentiation via new features, improved performance, after sales service
or through cost leadership at two state of the art manufacturing facilities in India
(Gurgaon and Manesar). It has the largest distribution & Service network.

In the fifth part we have segmented the population on the basis of demographic,
psychographic and behavioural aspect and targeted young male professional,
having a nuclear family. The positioning statement we used for our product is To all
the young men, adventure is back! Presenting the new cross, a compact SUV for all
your family needs. Well position our compact SUV towards fuel efficiency and best
in vehicle styling (exterior) in the perceptual map.

In sixth part of the report we have defined our objective which is to obtain a
market share of 10% by selling 60000 units in the first year estimating per unit
profit percent of 20.

Seventh part of this report presents the positioning of our product XA Alpha as
the ultra modern, fuel efficient compact SUV for the new age modern family,
friendly to pocket and easy on maintenance. We have defined the marketing
strategy in detail in the report.

Chapter 8 defined our Action plan we will be adopting to get an advantage over
the prevailing players in the market. Here we have defined our product, pricing,
distribution, promotional and sales force strategies. We will be launching our
compact SUV in three variants. Detailed points of differentiation and parity,
(3)

packaging and warranty structure are discussed further in the report. As a

distribution strategy we will be utilizing the already established network of Maruti.
For pricing we will be adopting market penetration pricing strategy to fulfil the
objective of maximum market share. The promotion for the product is divided into 4
phases.

9th part of the report presents the Monitoring and Contingency plans. Different
tools are identified for the launch of our product. Using Marutis extranet-based
information network and balanced scorecard concept, we will measure and track the
performance of the dealers. Trainings, GPS enabled trucks, exclusive team for
handling sales of SUV, group leader assigned to the group will help in the tracking
and monitoring of the sales.

Section 10 gives us the profit and loss account for our product. Expecting sales of
60000 units in the ratio of 8:9:3 for the LDi, VDi and ZDi models we will be able to
generate a net profit of 77.2 lacs in the first year. Profit in the first year expected
due to low cost of production due to existing setup of MSIL and only cost involved in
R&D, engineering costs, developing prototypes testing, and making modifications in
the existing plant.

(4)

MISSION
Mission Statement
To create exceptional automotive value for our customers by harmoniously blending
safety, quality and efficiency. With our diverse team, we will provide responsible
stewardship to our community and environment while achieving stability and
security now and for future generations.

Vision
The leader in the Indian Automobile industry, Creating customer delight and
shareholders wealth; A pride of India.

Values

Customer obsession

Fast, Flexible and first mover.

Innovation and creativity.

Networking and Partnership.

Openness and Learning.

Maruti belongs to an automobile industry which has tough competitions from other
players after liberalization when companies like Hyundai, Honda, Skoda and Toyota
started selling in India. The core competencies of Maruti include strong customer
base and brand image, well developed sales and service network, very strong
knowledge of Indian market. The current strategies of MSIL includes develop
capabilities and internal resources to finance its expansion and growth, To make
India an exclusive car manufacturing base to leverage frugal engineering, to
establish R&D facility in India to produce cars in India, starting from design till
production.
Marutis leadership in market is due to its cost advantage which is the least among
all other players in the market. The willingness to pay is also high because
customers can easily pay required cost because they are getting what they are
expecting with low cost.

INDUSTRY AND COMPETITIVE ANALYSIS

Passenger Vehicle Industry
The automobile industry is one of Indias most vibrant and growing industries. This
industry accounts for 22 per cent of the country's manufacturing gross domestic
product (GDP). The auto sector is one of the biggest job creators, both directly and
indirectly. It is estimated that every job created in an auto company leads to three

(1)

to five indirect ancillary jobs. The automobile Sector is divided into four parts
a)Passenger Vehicle; b)Commercial Vehicle; c) Two Wheeler and d)Three Wheeler.
Domestic Market share of each segment in Indian Automobile Industry in
percentage is:

Two Wheelers

3 3
14
Passenger Vehicles

Commercial Vehicles

80
Three Wheelers

Figure 2: Market share of Segments of Automobile industry in India

Data from industry body Society of Indian Automobile Manufacturers (SIAM) showed
that 137,873 passenger cars were sold in July 2014 compared to 131,257 units
during the corresponding month of 2013. Among the auto makers, Maruti Suzuki,
Hyundai Motor India and Honda Cars India emerged the top three gainers with sales
growth of 15.45 per cent, 12 per cent and 11 per cent, respectively.
The Passenger Vehicle Industry is further divide into three Categories.

Passenger Cars
Utility Vehicles
Vans

Major players in Indian Passenger Vehicle Industry are:

Maruti Suzuki India Ltd (MSIL)
Maruti Suzuki India Ltd (MSIL), commonly referred to as Maruti
and
formerly known as MarutiUdyog Ltd, is an automobile
manufacturer in India. The company is engaged in the business of manufacture,
purchase and sale of motor vehicles, automobile components and spare parts
(automobiles).

Leader in car market

Market share of 39.12 per cent in overall passenger vehicle market
Production of 1.5 million cars every year
Net sales rose 21.3 per cent to Rs 426, 125 million in (US$ 6.83 billion) FY13
(2)

Net profit up by 40.6 per cent to Rs 23,921 million (US$ 383.48 million) in
FY13.
Hyundai Motor India Ltd (HMIL)
Hyundai Motor India Ltd (HMIL) is a wholly owned
subsidiary of Hyundai Motor Company (HMC). It is the largest passenger car
exporter and the second largest car manufacturer in India. It currently markets 10
car models across segments (the classification is done on the basis of the length of
the automobiles) in the A2 segment it has the Eon, Santro, i10, Grand, Xcent and
the i20; in the A3 segment the Verna; in the A4 segment the Elantra; in the A5
segment Sonata; and in the SUV segment the Santa Fe.
Tata Motors Limited
Established in 1945, Tata Motors Limited is India's largest
automobile company with over 60,000 employees. The
company is the leader in commercial vehicles in each segment,
and
among the top in passenger vehicles with winning products in the compact, midsize
car and utility vehicle segments.
Honda Cars India Ltd., (HCIL)
Honda Cars India Ltd., (HCIL) Is A Leading Manufacturer Of
Premium Cars In India. The Company Was established In
1995 With A Commitment To Provide Hondas Latest
Passenger Car Models And Technologies, To The Indian
Customers. The Company Is A Subsidiary Of Honda Motor Co. Ltd., Japan.

Industry performance for last five years (FY 09 to FY 14)

Domestic Passenger Vehicle Sales Trend

Passengere Vehicles Sales (Units)

3000000
2500000
2000000
1500000
1000000
500000
0

2009-10

2010-11

2011-12

2012-13

Figure 3: Passenger Vehicles Sales in Units (Source: SIAM)

(3)

2013-14

Passenger Vehicle Growth

% Growth Rate
40
30
20
10
0
-10

FY9

FY10

FY11

FY12

FY13

FY14

Figure 4: Passenger Vehicle Growth Rate (Source: IBEF; SIAM)

Division of sales of Passenger Vehicles

2500000
2000000
1500000
1000000
500000
0

2011

2012

2013

2014

Figure 5: Division of Sales of Passenger Vehicles (Source: SIAM)

Sales Volume of Compact SUV in India

(4)

Compact SUV/ Sales Volume

2013
2014
Units
Units
Renault Duster
55571
46786
Ford EcoSport
*Launched in June 56336
2013
Mahindra Scorpio
53118
58049
Nissan Terrano
12533
19757
Source: AutoSport.com, Renault Monthly Sales report, Ford Monthly Sales Report, ET

Projection of Growth in Car Sales for Five Year

In July 2014 passenger vehicle Industry grew by 2.46% (Source IBEF) and its been
increasing since then at rate of 3-5%. Due to decrease in excise duty, reduction in
fuel price and new Economic reforms under P.M NarendraModi, its been estimated
that passenger vehicle industry will grow by 10%.According to result sales analysis
by ford, Renault and Mahindra UV segment will grow by 15%.
CAGR for Passenger Vehicles: 10%.
CAGR for Utility Vehicles : 15%

Projection of Passenger Vehicle Industry for 5 years(units)

4500000
4000000
3500000
3000000
2500000
2000000
1500000
1000000
500000
0

2014

2015

2016

2017

2018

2019

Figure 6: Projection of Passenger Vehicle Industry for 5 years (units)

(5)

Growth in demand for Passenger Vehicles Urban v/s Rural

120
100
80
%

60
40
20
0

2004-05

2009-10

2013-14

2019-20E

Figure 7: Growth in demand for Passenger Vehicles Urban v/s Rural

Source: KPMG;TATA motors; Emkay Research; NCAER

The automobile industry has yet to fully tap into demand from rural areas.
Previously, consumers from these areas would need to go to automobile dealerships
in towns and cities for their vehicle purchases. However, in recent years, market
players have made overtures to rural consumers. We can see a gradual increase in
sales in Rural Areas. There is need for sufficient presence in rural segments with
cars/UVs which meet the specific needs (e.g., low cost UVs) of the agrarian, selfemployed customer base.

Market share of different manufacturers of Passenger cars in

India
The below statistics shows the market share of different manufacturers of
passenger cars in India in Financial year 2014.

(6)

Market Share in Percentage

Ford India

3.37

Toyota

5.18

Honda Cars

5.36

Tata Motors

5.59

Mahindra and Mahindra

9.15

Hyundai Motor

15.18

Maruti Suzuki
0

42.08
5

10

15

20

25

30

35

40

Percentage

Figure 8: Market Share of leaders in Passenger Vehicles

Source:
share/

http://www.statista.com/statistics/316850/indian-passenger-car-market-

PERFORMANCE REVIEW
Maruti Suzuki India Limited is Indias leading Passenger car manufacturer and
market leader both in terms of vehicles sold and revenue earned.
The company has variety of brands in its basket to cater to demand of various
customers i.e ranging from the peoples car Maruti 800 to the stylish hatch-back
(7)

45

Swift, recently launched Ciaz sedan and luxury sports utility vehicle (SUV) Grand
Vitara. The company has received various accolades due to its continuous
innovations and technological up gradations. The company today is very conscious
about safeguarding the environment from vehicle pollution which resulted in
launching of its advanced K-Series engines. Despite of stiff competition, Maruti
Suzuki India Limited is presently considered as the leading automobile manufacturer
due to its significant Economic, Environmental & Social performances.
Maruti is the only company to cross 10million sales mark since its inception. Maruti
Suzuki has been ranked No1 by JD Power Asia Pacific 2014 in customer satisfaction
and for the 15th consecutive year.

Product Mix

The product strategy of Maruti is that its focus is on catering the needs of people
from lower and middle income groups.
Company creates products that are unique and valued and it is attaining
advantage either through differentiation via new features, improved
performance, after sales service or through cost leadership.
Maruti Suzuki has divided its products into various categories as below
Hatchback Alto 800, Alto K10, WagonR, Swift, Ritz, Celerio,Stingray
s
Sedans
Dzire, Ciaz
Vans
EEco, Omni
SUVs/MUVs Ertiga, Gypsy, Grand Vitara
The cars can also be divided on type of fuel used. Some cars are available in both
diesel and petrol option. Few cars come with CNG fitting too like Alto K10.
Pricing Strategy

Marutis pricing strategies are such that every consumer can own a car or
upgrade to another one of his or her choice. Consumers using two wheeler can
upgrade to four wheelers and already four wheeler owners to upgrade to a
better car offered by the company.
It follows a price-point-strategy wherein they have products available in almost
all possible price points.
Alto-800 is the lowest price model of this company. Grand Vitara is the highest
price model of the company.
Place

Maruti Suzuki has two state of the art manufacturing facilities in India (Gurgaon
and Manesar).
This is the advantage that Maruti enjoys over its competitors since its present in
the country for the longest time period. It has the largest distribution & Service
network comprising of 933 dealerships across 666 towns and cities of India.
(8)

It has more than 3000 service stations in 1454 towns and cities throughout India.
It has 30 Express Service Stations on 30 National Highways across 1,436 cities in
India.
Promotion Strategy

Maruti has for most of its years of operation targeted Indian middle class families
as their main consumers. The company tries to create an emotional connect with
its customers through its advertising campaigns like Count on Us or Lets go
home in a Maruti Suzuki.
Maruti Suzuki has also partnered with certain TV shows like Indias Got talent
and also provides sponsorship to various big events to make its presence felt.
The company also emphasizes on road safety. Company has also partnered with
banks , insurance companies to provide its customer hassle free environment in
purchasing of the car.
The company also has a brand loyalty programme Auto Card to retain
customers and and to increase brand loyalty by giving attractive exchange
discounts, complentary gift vouchers.
The company has taken help of all the promotional tools like radio, television,
road shows, print media, workshops and seminars to promote their cars.

OBJECTIVE:
To obtain a market share of 10% by selling 60000 units in the first year.
The estimated profit per unit would be approximately 20% of the Cost of car, which
is to be launched in three variants Ldi for Rs. 7.5 lacs, Vdi for Rs. 8.5 lacs and Zdi
for Rs. 9.5 lacs.

MARKETING STRATEGY
Positioning Statement:
We are positioning the XA Aplha as the ultra modern, fuel efficient compact SUV
for the new age modern family. It is friendly for the pocket and easy on
maintenance.

Overall Marketing Strategy

Maruti will use the established Brand in the minds of the consumer and portray the
new Compact SUV with basic features of Comfort and Sporty look associating the
same as High on Safety, Performance and a New Age Family car. The new launch
shall compete on differentiation on the grounds of

Fuel Efficiency
Best Service Network
Computerized Fuel Management System to optimize fuel consumption

(9)

Maruti as a brand is one that has long enjoyed unmatched market domination in
India for decades as one whose quality service, genuine spares and a customer
friendly dealership is available across the every nook and corner of urban India,
characteristics which its competitors in the segment cannot establish in the
foreseeable future.
To best take advantage of the same, the target customer is a young male
professional, having a nuclear family. He aspires to own a vehicle that is technologyfeature rich, premium, sporty and modern. The vehicle has been designed to
differentiate him from others in his social circle, who own cars and at the same time
support their daily personal and professional needs. This makes the possession of a
compact SUV by an age old trusted and well penetrated brand a tempting choice for
the consumer who wishes and is able to pay more than a sedan/hatchback for an all
weather and road car while increasing their societal prestige.
The vehicle is suited for urban lifestyle enabling one to discover new places. Thus it
is targeted mainly for the tier 1 and tier 2 cities.
The promotional activity for the new launch would comprise of advertisements in TV
and print media, events and experiences through activities such as ride and drive
events and celebrity endorsements. Maruti has a strong dealer network. Thus we
would make use of the already established vast dealer and service network for the
new launch.
Sales Objectives
The target is to gain 8-10% of market share in the first year by selling 60000 units.
We will opt for aggressive marketing strategies in order to achieve a sales target of
1,00,000 lac units in a time span of 1.5 yrs. The expected sales for the upcoming
years are mentioned below :

First year

Second year
Third year

60,000 units
75,000 units
93,750 units

ACTION PLAN
Product Strategy
We have developed marketing plan for the launch of a Compact SUV (Sub urban
vehicle) under the brand of Maruti-Suzuki, by the name of XA Alpha.
Specifications of XA Alpha for LDI (Basic) Model

Engine
Fuel Type
Maximum Speed

: 1.3 litre multijet Deisel Engine

: Deisel
: 180 kmph
(10)

Gear Box
Maximum Power
Other

: 6 Speed manual Transmission

: 105 bhp
: 64-bit Computerized Fuel Management System

Features of XA Alpha for LDI (Basic) Model

Integrated 2DIN Sony Touch

Screen Audio System
with
Bluetooth Connectivity

Automatic Climate Control

Air Quality Control

Multi-function Steering Wheel

LED day Light

ABS system

Air bags in Front

The XA Alpha will be launched with 3 variants.

LDI : Will be the basic model of XA Alpha

VDI : It will have all the features of basic model plus the additional feature
will be two modes of driving i.e Economy and Sports mode.

ZDI : It will have all the features of VDI model plus additional features will be
Cruise Control, Automatic Transmission, 4 Air bags, Alloy Wheels, Active
Parking Assist and panoramic sunroof.

Air Conditioner with Front and

Rear A/C Vents
Power Steering
Engine Start/Stop Button
Foldable Rear Seat Bench
Folding
Navigation System
Adjustable Seats

(11)

Core
Customer
Value

A 5 seater comfortable and easy to drive Compact SUV.

Basic
Product

Fuel Effecient with mileage of 19/22 kmpl.

1.3l Multijet Diesel Engine
Air Conditioner with Front and Rear A/C Vents
Power Steering and windows
Great leg space with Adjustable Seats

Expected
Product

Augment
ed
Product

Air bags
Integrated 2DIN Sony Touch Screen Audio System with Bluetooth
Connectivity
Automatic Climate Control
Air Quality Control
Multi-function Steering Wheel
ABS
Maruti finance and Insurance Cover
3 years/(< 50000 km) warranty
After sales service- Maruti one stop shop

Potential
Product

Automatic Transmission
Active Parking Assist
LED day Light
Push Start / Stop Button
64- bit Computerized Fuel Management System

Points of Differentiation
Vast Service Network of Maruti-Suzuki giving XA Alpha a low maintenance
cost and assured high Reliability from Maruti.
Highly Fuel efficient giving mileage of 19/22 kmpl in city/highway.
Computerized Fuel Management System to optimize fuel consumption based
on drivers Driving pattern.
(12)

Points of Parity
A 5-seater comfortable passenger car giving a feeling of luxury and high on
performance.
It has great styling and gives a sporty look.
Easy to Drive.

Packaging
XA Alpha will be launched in 7 Color:

Obsidian Black
Palladium Silver
Polar White
Imperial Blue

Electric Red
Sparkling Bronze
Mineral Gray

Optional Features
Can add Spoiler to the car costing an additional Rs. 10,000\Stickers and custom paint job as per the Customer requirement at the time of
placing order by paying additional Rs.25,000\-

Warranty
Every Maruti Suzuki car comes with a statement of support to promote
customer confidence: our warranty. The support it provides is in the form of
replacement parts or repairs done for qualified failures associated with
manufacturing defects in material and/or workmanship.Our primary warranty,
as of now, is for a period of 36 months or 50,000 kms (whichever comes first)
from the date the first owner takes delivery.

Forever Yours is the extended warranty program. The standard warranty

can be extended by one or two years for a nominal amount, at any time
before the warranty period ends or before 40,000 kms.

Product Objectives
We want to provide our customers, a car with sporty looks & comfortable
driving experience combined with an unbelievable mileage. We will promote
the following characteristics of our car by communicating these features

1-Mileage

2-Sporty looks

3-Features

Brand Positioning Bulls eye

(13)

4-Space

Distribution Strategy

Distribution strategy of a firm is a plan created by the management of a

manufacturing business that specifies how the firm wishes to transfer its
products to intermediaries, retailers and end consumers.

Maruti has a strong dealer network. In fact it was one of the very first
companies in the country to understand the importance of after sales service
in high involvement products like cars. It has the largest distribution &
Service network comprising of dealer sales network of 1204 in 874 cities and
service network of 3013 in 1436 cities. It has 30 Express Service Stations on
30 National Highways across 1,314 cities in India. Most of the service stations
are managed on franchise basis where Maruti trains the local staff. To
increase their reach to rural India, where setting up a complete dealership
was very difficult, they opened extension counters which are operated by
some dealer in the city thereby ensuring increased customer touch points
without risking the viability of the dealers.

Thus we would make use of the already established vast dealer and service
network for the new launch.

Pricing Strategy

There are various factors to determine a priceof a car, such as market

condition, cost incurred to build a car, profit by company, dealer margins.
(14)

Objective: To get maximum market share in the long term in their respective
segment. MUL follows a market-penetration pricing strategy to fulfill its
objective.

Elasticity: Demand curve for cars is highly elastic since price in an

important attribute and plays a major role in consumer decision making for
cars and there is also a significant competition for cars in this segment.

Particulars for LDi Model

Cost per
(Rs.)
Cost of manufacturing a car

4,50,000
Excise Duty-12%

54,000
Warehousing

2,000
Selling,Transportation & Freight Insurance

15,000
Admin Expenses & Operating Costs

30,000
Promotion

20,000
Distributor Margin

60,000
Total Cost

6,31,000
Profit Margin by Company

1,20,000
Ex-Showroom Price

7,51,000
Registration Charges(8.75%)

65,712.5
MCD registration and Road tax(4.5%)

36,856.25
Insurance

24,000
On Road Price to customer

8,78,570
*Note: Registration charges and Road Tax are applicable in Delhi

Unit

The company offered a different model at a price difference of around

100,000 and the prices below are Ex-showroom prices.

Base model
Middle
Model
Top Model

Ford
Ecosport
Rs. 7,80,000
Rs. 8,90,000

Rs. 9,89,000

Renault
Duster
Rs. 8,99,000
Rs.
10,73,000
Rs.
11,63,630

Maruti XA
Alpha
Rs. 7,51,000
Rs. 8,51,000

Rs. 9,51,000

For the base model(LDI),the company keeps a profit of 8% i.e. Rs.60000 for
the dealer and the profit increases nominally as per the variant.For the
VDI,which achieves the highest sales, the profit kept for dealers is of 10% and
in case of the top end model(ZDI) is it restricted to 11%.

As far as the payment terms are concerned, the company doesnt have any
credit terms with the dealers, the cars are delivered only after receiving the

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complete payment from them. The company also has incentives (1.5%
discount) for dealers who cross a sale target of 100 units per month.

The Car has been strategically priced among its competitors.

MUL has an excellent brand image in compact car segment build over last
three decades. This adds to consumer perceived value.
The price of the car is also at par with the benefits it provides to the
customers which is in accordance to MULs brand image.
The price of the product is subject to fluctuation in price of raw materials and
foreign exchange rates. Company has to charge for covering these risks.

Promotional Strategy

PHASE 1:

XA Alpha will be launched in Auto Expo 2016. This is the first time, the car
would appear for press and public. Full page front advertisements would start
appearing in major national newspapers like HT, TOI, Navbharat Times,
Economic Times, Punjab Kesri , Tribune and local dailies too from December
2015 on weekends, not revealing the car name, but just indicating that a
compact SUV from Maruti Suzuki is going to be launched in the upcoming
Auto-Expo 2016.

The advertisements would focus on exciting the customer about coming to

the Auto-Expo and taking the first look of the new SUV. The tag line which
would appear in the newspapers for December would be:

Come and experience the next generation of compact SUVs by

Maruti Suzuki this Auto-Expo season.

The car showcase would be done by celebrity Akshay Kumar, since his public
image relates to the personality of the car we are launching, Stylish, modern
and for the Indian family.

PHASE 2:

After being launched in the Auto-Expo, the car would be available through
various events for experiencing, covering mainly the major malls in our
target cities, and also would be available at all the showrooms across the
country for a test drive experience. The weekend (full page front/back ads)
newspaper coverage would continue to attract the interest of the customers.

There would also be TV advertisements running along with these campaigns

in which Akshay Kumar would be seen endorsing XA Alpha. The post launch
tag line for XA Alpha plus would be:

DONT DREAM, DRIVE IT

(16)

BE AN ALPHA

PHASE 2 ADDED ATTRACTION: After 2 weeks of these campaigns running,

there would be a special weekend newspaper promotion activity in which a
real car key would be given attached/sticked with newspaper front add and
customers can bring that car key for test drive and win gift hampers from
Maruti Suzuki.

PHASE 3:

After 1-2 month of the launch, an event called RIDE AND DRIVE would be
organized in major cities/metro cities in which car rallies would be organized
and people who already have the car, booked the car would be invited. Also
various people like prominent bloggers for auto industry ,media, journalists
would be invited.

PHASE 4:

Maruti Suzuki plans to present one XA Alpha to the man of the series in T20
World Cup.

APPROXIMATE BUDGET FOR THE ABOVE MENTIONED PROMOTIONAL

ACTIVITIES:

MODE

AUTO
EXPO

CELEB
RITY
ENDOR
SEMEN
T
NEWSP
APER
ADS
AND
PROMO
TION

APPROX
IMATE
BUDGET
(Cr.)

.45

15

12

REMARK

AUTO-EXPO can provide a great

platform for capturing the target
audience plus a great media
coverage.
Brand
personification/Public
attraction.

45

37

(17)

Mass awareness. All major national

and local dailies to be covered,
primarily on weekends.

TV ADS
AND
PROMO
TION
RIDE
AND
DRIVE
EVENT
T20
WORL
D CUP
June
July
2016
Total

40

33

All major channels like news,

sports, family and entertainment.

10

8.

Generating
and
customer interest.

9.55

7.

Creating more Brand/Product value

and popularity.

120

10

maintaining

Source: All estimates have been quoted by taking prices from various
websites from the internet.

MONITORING AND CONTINGENCY PLAN

A well planned and managed launch plan is critical to a new products

success in the market place and achieving product goals. From the
customers view point , the launch of a new product or service must appear
smooth and its value proposition compelling

Support Tools for effective launch

Sales force ,tools and training

Distribution and logistics
CRM Tools
Product Management Tools and KPI

Launch Monitoring and Adjustments

Performance dashboards
Operation monitoring
Product Performance Tracking

The sales network of Maruti is linked with the secured extranet-based

information network. The dealers are asked to maintain the showroom as per the
norms and specification provided by Maruti.
By the help of balanced scorecard
concept, MUL measures the performance of the dealership in areas like services,
sales, spares and accessories, management system and financial management. The

(18)

dealers who perform well are rewarded by the company at the end of each financial
year thereby enhancing the performance of the dealers.

The company exclusively arranges training for all the staffs (technical, nontechnical) to keep them well-run. The companys trucks carrying the vehicles are all
equipped with GPS so that the dealers can track their dispatch from the factory to
the showrooms.

Since all the cars are sold under one roof, the only way to boost the sales of
the SUV is by assigning exclusive manpower to the new product with complete
accountability for sales of the car. There would be an exclusive team handling the
sales of the car and would trained appropriately about the SUV.

Apart from showroom sales there are other channel of sales that need to be
looked and monitored. These could be retail finance sales, institutional sales and
sales through direct marketing activities. There would be a separate team handling
each kind of sales. For ease of monitoring and controlling one person from each of
the specified sales team would be designated as group leader, who would be
accountable for teams performance.

Once the showroom as well as field teams are in place, there would be a
marketing manager to coordinate the activities of these various teams and
be responsible for strategy formulation, target setting, monitoring and
evaluation of performance of each team, in line with overall objectives of the
company.

Sales planning involve two concepts

Target setting: Target for each month to be defined and communicated to the
team. This will give each member a goal to strive for and help in quantifying
his/her performance.

Enquiry Targets: For achieving the desired sales volume, it is important that
adequate number of sales enquiries are generated .Depending upon enquiry to
conversion (sales) ratio, target for the number of enquiries per month should be
defined. Enquiry generation would of course depend upon the publicity level.
Therefore a well planned target setting and monitoring system for enquiries will
make the task of achieving sales target easier.

Monitoring achievements against targets at regular intervals is of immense

importance. It allows us to take stock of the situation every ten days and help
in initiating corrective actions well before the month end.In the worst case
scenario if this plan fails, exiting from the segment is not an option. Marutis
vision is to be a leader in the automobile industry and to be a major player in
the industry its crucial to enter the compact SUV segment. This is a segment
(19)

where the size of the target customers are growing at a fast rate and at the
same time the number of players catering to the needs of these consumers
are relatively low. Hence if the present plan fails, Maruti should reposition and
try and break into the segment again. It can reduce the price since the
margin is good enough else it can also do facelift like change some styling
like introduce new headlamps, exterior grill or some changes in the interior.

PROFIT AND LOSS STATEMENT

LDI Model

2
8,
8
0
0
2
4
0
0
0
P
er
U
ni
t
Pr
ic
e
(R
s.
)

Units
Produced

Units Sold

Items

Fixed cost For

T
o
t
a
l

C
o
s
t

(
R
s
.
)
*
1
0
0
0
0
1
(20)

VDI
Model
3

2,
4
0
0
2

7
0
0
0
P

er
U
ni
t
Pr
ic
e
(R
s.
)

ZDI Model

1
0,
8
0
0
9
0
0
0

P
er
U
ni
t
Pr
ic
e
(R
s.
)

T
o
t
a
l

C
o
s
t
(
R
s
.
)
*
1
0
0
0
0
1

T
o
t
a
l
C
o
s
t

(
R
s
.
)
*
1
0
0
0
0
5

R&D, Assembly
Line for New
Car

Cost
of
manufacturing
a car

Excise
12%

Duty-

4
0
0
0

4
5
0
0
0
0

5
4,
0
0
0

Warehousing

Selling,Transpo
rtation
&
Freight
Insurance

Admin Exps &

Operating
Costs

Promotion

Distributor
Margin

2,
0
0
0
1
5,
0
0
0
3
0,
0
0
0
2
0,
0
0
0
6
0,
0
0
0

Total Cost

1
2
9
6
0
0
0
1
5
5
5
2
0
5
7
6
0
4
3
2
0
0
8
6
4
0
0
5
7
6
0
0
1
7
2
8
0
0
1
(21)

5
7
5
0

4
9
0
0
0
0

5
8
8
0
0

2
0
0
0
1
5
0
0
0
3
0
0
0
0
2
0
0
0
0
8
5
0
0
0

1
5
8
7
6
0
0
1
9
0
5
1
2
6
4
8
0
4
8
6
0
0
9
7
2
0
0
6
4
8
0
0
2
7
5
4
0
0
2

2
5
0

5
3
5
0
0
0

5
7
7
8
0
0

6
4
2
0
0

6
9
3
3
6

2
0
0
0
1
5
0
0
0
3
0
0
0
0
2
0
0
0
0
1
0
4
5
0
0

2
1
6
0
1
6
2
0
0
3
2
4
0
0
2
1
6
0
0
1
1
2
8
6
0
8

8
0
2
4
0
0

Ex-Showroom
Price

Total
Sales
( Units Sold X
Ex-Showroom
Price)

Profit
/Loss(Total
Sales - Total
Cost)

Net Profit

7
5
1
0
0
0

1
8
0
2
4
0
0

1
0
0
2
7.
7
8
7
7,
2
0,
0
0
0

2
9
7
7
0
0
8
5
1
0
0
0

5
5
9
0
0

2
2
9
7
7
0
0

2
8
8
8
0

3
5
0
5.
5
6

9
5
1
0
0
0

1
1
3
5
8

1
6
9
3
8.
8
9

8
5
5
9
0
0

1
8
2
9
4

The Net Profit made on all the models combined is Rs. 77.2 lacs and closing
Inventory of 12,000 units.

Since Maruti has an existing set-up for production of cars and had reached
the breakeven point in 1970s, the costs of developing a new car involves

(22)

R&D, engineering costs, developing prototypes testing, and making

modifications in the existing plant, the expected costs sums up to Rs.35cr.

These figures have been estimated on the assumption* that 40% of sales are
of the base variant(LDi), 45% of the cars sold are of the intermediate variant
(VDi) and nearly 15% of the sales are of the top model(ZDi).

*This assumption has been taken on the data provided by an authorized

Maruti dealer loacated in Lajpat Nagar.

As per the usual demand of customers, the production of each variant will
also be in the ratio of 8:9:3. We have estimated that the annual production is
of 72000 units, however we were successful in selling 60000 units. The
respective costs and profits per variant are given below.

(23)

MARKETING MANAGEMENT-II

FORE SCHOOL OF
MANAGEMENT

REFERENCES

KPMG Automotive Survey-2012 and -2014.

Crisil Automotive Sector in India Research
www.ibef.org
http://www.siamindia.com/scripts/market-share.aspx
http://118.67.250.203//scripts/industrystatistics.aspx
www.ibef.org/download/Automobile-August-2014.pdf
articles.economictimes.indiatimes.com/2014-04-11/news/49058710_1_honda-carsindia-maruti-suzuki-india-passenger-vehicle-sales
http://www.managementparadise.com/knt.nallasamygounder/documents/5040/mark
eting-strategy-analysis-of-maruti-suzuki/
http://www.slideshare.net/iimjobs/india-automobiles-sector-report-april-2014
http://www.managementparadise.com/knt.nallasamygounder/documents/5040/mark
eting-strategy-analysis-of-maruti-suzuki/
http://www.marketing91.com/swot-analysis-maruti-suzuki/
www.mbaskool.com/brandguide/automobiles/1299-maruti-suzuki.html
Articles from Business Standard, Economic Times.
http://www.careergyaan.org/downloads/scdl/38119894-car-strategies-in-india.pdf
http://en.wikipedia.org/wiki/Ford_India_Private_Limited
http://en.wikipedia.org/wiki/Renault_India_Private_Limited