Automobile Industry With Respect to Maruti Suzuki

8/3/2019 Automobile Industry With Respect to Maruti Suzuki

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EITHER DIRECTLY OR INDIRECTLY INVOLVED IN TIME WITH THEIR

VALUABLE CONTRIBUTION.

PREFACE

Objectives:

1. To know the past, present and future of Maruti.

2. To know the reason of enormous success of Maruti through thechallenging dynamics of Indian Auto Industry.

3. To enhance my knowledge about Maruti Udyog Ltd.

Research Methodology:

Collection of Primary Data Periodicals and Magazines, Books,Internet.

Collection of secondary data Interaction with dealers service centersCar owners, workshops, etc.

My project throws a light on Marutis path of success and how it has

achieved the distinction of being The best in the business.

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EXECUTIVE SUMMARY

In this project I have studied the undisputed king of Indian automobileindustry with giving special significance to Maruti Suzuki. I have focused onthis organization and have ventured in to as much of detail as possible in my

limits.This project covers the profile of the company, right from its inceptionto its currents status.

The objective of doing this project was to study the pioneeringjourney of Maruti and my keen interest in the automobile industry.

Rationale behind the Study:

I follow automobile and its related fields very keenly and thus I wanted totake a project very closed linked to my interest. It had many topics in it but Izeroed in on an Indian automobile giant- Maruti.

`Studying Maruti was great fun since it is such a machine that is ineach and every corner of our country. I learnt a lot while working on this

project and the knowledge I received is tremendous. I just kept on coming. Itwas a great experience to learn how Maruti adopted itself to changeaccording to the surroundings and fix its foundation in the Indian Market.

The study kept on stimulating me to work more and gain as much aspossible, sometimes beyond my capacities, but I am happy I was able topresent the epics of Maruti in this small report.

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INDEX

SR.NO TOPIC PAGE

NO.

PREFACE

1. Introduction 1

2. History of automobile industry 9

3. Introduction of Maruti udyog ltd. 20

4. A long standing partnership 40

5. Just the right mix 42

6. Pleasing the KING Consumer interface 51

7. Speed and speed breakers Strength and

weakness

56

8. The challenge 58

9. Journey towards victory 64

10. Future prospects 66

11. Conclusion 68

12. Bibliography and webliography 70

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13. Annexure 71

1. INTRODUCTION

The Beginning of New Era

With the invention of the wheel in 4000 BC, mans journey on the road of

mechanized transport had begun. Since then he continually sought to devise an

automated, labor saving machine to replace the horse. Innumerable attempts reached

conclusion in the early 1760s with the building of the first steam driven tractor by a

French Captain, Nicolas Jacob Cugnot.

It was however left to Karl Benz and Gottlieb Damlier to produce the first

vehicles powered by the internal combustion engine in 1885. It was then that the petrol

engine was introduced, which made the car a practical and safe proposition. Then

onwards, it has been one big journey...on the roads

1.1 Global Scenario

The passenger car segment has emerged as a major driving force for upstream industries

like steel, iron, aluminum, rubber, plastics, glass, and electronics and down stream

industries like advertising and marketing, transport and insurance. The car industry

generates large amount of employment opportunities in the economy. For example in the

US, every sixth worker is involved in the making of an automobile.

The global automotive car market is growing at a rate of only 2 percent per annum and is

not expected to pick up in the near term. Growth has dropped due to the increasing levels

of saturation in the larger car markets of the world. Worldwide the trend is towards

ensuring that one's products are superior in terms of quality. This will enhance the useful

life of cars and, hence, slow down growth in sales.The world car production has

increased from 44.66 mn in 1996 to an estimated 48.3 mn cars in 1999. Japan, Canada

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and USA brought about the major increases, which contribute to 53% of the world's car

production. The largest car market - the US market expects car sales to decline 8 to 9 per

cent to 16 million cars in 2008, as compared to 17.4 million cars sold in 2000.

The USA and Japan are the leaders with around 42% of the total world market. However,

since the last two to three years, the international passenger car industry has been

witnessing an over capacity of more than 30%. The trend suggests that industry volumes

may grow by just 2% or around 10 mn vehicles per year. If this situation continues for the

next few years the world car market may witness shakeout in the near future. Already

signs towards this are being observed as the phenomenon of mergers catches on. The

recent mergers in the international car market are Ford-Volvo, Renault-Nissan, Daimler-

Chrysler. A few more players are expected to join the fray in the next few years so as to

strengthen their hold in the world market. Among the top car manufacturing companies

General Motors and Ford Motors group of USA lead with a contribution of 15.8% and

11.6%, of world car production, respectively. Volkswagen and Toyota stand third and

fourth with more than 9% contribution each to the world car production.

The global domination of the larger automotive manufacturers is slowly on the wane andthe trend in sales is shifting towards more "regio-centric" products. Automakers that have

been enjoying a generally prosperous spell would have to rethink on the way vehicles are

designed, manufactured, distributed or sold. Already, players like General Motors

MARUTI and SUZUKI have begun to re-examine their dealer relationships and pricing

strategies. Car makers would now have to think in terms of a new customer focus and

provide better financing and servicing. Strategic tie-ups, mergers and acquisitions have

become the talk of the day. A few instances are Daimler Benz's tie-up with Chrysler of

the US, Ford's acquiring of Daewoo and tie up with Volvo Car Corporation and Renault

acquiring a stake in Nissan. Such deals will certainly lead to economy in terms of costs

but it remains to be seen whether they will also create significant new opportunities for

growth.

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With global consolidation in the car industry, it is expected that more international

players will work closely to bring about operational efficiencies. By nature, the car

industry is highly capital-intensive and vast amounts of money are being spent on R&D.

With the players getting together to produce more technologically superior cars, they can

derive greater benefits from their R&D efforts. Profits, which are under pressure due to

wafer thin margins will be boosted due to greater economies of scale. Moreover, bigger

capacities among players means lesser fixed costs per car produced. Even if mergers are

not on the cards in the near future (one can see that the Daimler-Chrysler merger has not

brought about synergies as expected by automobile experts), technology-sharing and the

offering of equity stakes is inevitable.

In India, the car market has become extremely competitive and come April 2009, India's

automobile market will be thrown open to imports of completely built up vehicles, which

hitherto was prohibited. With the international acquisitions and alliances, one can expect

to see a dramatic change in the auto market. If GM were to acquire Daewoo in Korea,

then GM would be in a commanding position in India with its alliance with FIAT and

Suzuki motors as well. Already Daimler Chrysler and Ford are contemplating introducing

new models in India from their various associate companies through their local

subsidiaries. The situation could become very difficult for the purely Indian automakers

such as Telco, Mahindra and Hindustan Motors unless they rethink their strategy. It can

easily be seen why TELCO has been in the news on rumors that it wants to hive off its

car division and bring in an overseas partner. Reports suggest that HM is thinking of

exporting parts from its manufacturing units and also assembling and distributing other

makes of vehicles who may wish to enter into India, but cannot enter full scale

manufacture due to the small market sizes.

Clearly exports will be the big opportunity for Indian automobile companies if they can

control costs and deliver good quality output. Already Maruti, Hyundai and Ford as well

as Mercedes Benz have started exports in a small way and this can grow. Majors like

TELCO and Ashok Leyland are already exporting their products in reasonable volumes.

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Availability of easy financing options has been a major reason for the dramatic growth

the automobile market has witnessed in recent times. Maruti has set up a separate

financing unit in association with banks. GM has one of the largest financing companies

in the US and can easily bring them into India should it so decide. Clearly the customer is

in for some good times with a wide range of models to choose from, better quality and

prices and easy financing options - a far cry indeed from the days when one had to book a

Premier car and wait for years after paying an advance.

1.2 A Glance on Wheels of Change

India had its date with this wonderful vehicle first time in 1898. Then for the

next fifty years, cars were imported to satisfy domestic demand. Between 1910 and 20's

the automobile industry made a humble beginning by setting up assembly plants in

Mumbai, Calcutta and Chennai. The import/assembly of vehicles grew consistently after

the 1920's, crossing the 30,000 mark in 1930. In 1946, Premier Automobile Ltd (PAL)

earned the distinction of manufacturing the first car in the country by assembling 'Dodge

DeSoto' and 'Plymouth' cars at its Kurla plant. Hindustan Motors (HM), which started asa manufacturer of auto components graduated to manufacture cars in 1949. Thanks to the

Licence Raj which restricted foreign competitors to enter the Indian car market, Indian

roads were ruled by Ambassador Car from Hindustan Motors and the Fiat from Premier

Auto Ltd. for many of the initial years.

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In 1952, the GOI set up a tariff commission to devise regulations to develop an

indigenous automobile industry in the country. After the commission submitted its

recommendations, the GOI asked assembly plants, which did not have plans to set up

manufacturing facilities, to shut operations. As a result General Motors, Ford and other

assemblers closed operations in the country. The year was 1954 and this decision of the

government marked a turning point in the history of the Indian car industry. The GOI also

had a say in what type of vehicle each manufacturer should make. Therefore, each

product was safely cocooned in its own segment with no fears of any impending

competition. Also, no new entrant was allowed even though they had plans of a full-

fledged manufacturing program. The restrictive set of policies was chiefly aimed atbuilding an indigenous auto industry. However, the restrictions on foreign collaborations

led to limitations on import of technology through technical agreements. In the absence

of adequate technology and purchasing power, the car industry grew at a snail's pace in

the 60s. The demand for cars in 1960 was to the tune of 15,714. In the next two decades

the number increased to 30,989 i.e. a CAGR of only 3.5 per cent.

The other control imposed on carmakers related to production capacity and

distribution. The GOI control even extended to fixation of prices for cars and dealer

commissions. This triggered the start of a protracted legal battle in 1969 between some

carmakers and GOI. Simply put, the three decades following the establishment of the

passenger car industry in India and leading upto the early 1980s, proved to be the 'dark

ages' for the consumer, as his choice throughout this period was limited to two models

viz. Ambassador and Padmini. It was only in 1985, after the entry of Maruti Udyog, that

the car makers were given a free hand to fix the prices of cars, thus, effectively abolishing

all controls relating to the pricing of the end product.

In the early 80's, a series of liberal policy changes were announced marking

another turning point for the automobile industry. The GOI entered the car business, with

a 74% stake in Maruti Udyog Ltd (MUL), the joint venture with Suzuki Motors Ltd of

Japan. The very face of the industry was changed for ever in 1983 with the entry of

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public sector Maruti Udyog in a joint venture with the Suzuki Corporation of Japan. Car

sales grew by 42 per cent yoy in 1985 after Maruti 800 was launched. Thanks to MUL

car sales registered a CAGR of 18.6 per cent i.e. from 1981 to 1990.

In 1985, the GOI announced its famous broadbanding policy which gave new

licenses to broad groups of automotive products like two and four-wheeled vehicles.

Though a liberal move, the licensing system was still very much intact. MUL introduced

'Maruti 800' in 1983 providing a complete facelift to the Indian car industry. The car was

launched as a "peoples car" with a price tag of Rs 40,000. This changed the industry's

profile dramatically. Maruti 800 was well accepted by middle income families in the

country and its sales increased from 1,200 units in FY84 to more than 200,000 units in

FY99. However in FY2000, this figure came down due to rising competition from

Hyundai's 'Santro', Telco's Indica and Daewoo's 'Matiz'.

MUL extended its product range to include vans, multi-utility vehicles (MUVs) and

mid-sized cars. The company has single handedly driven the sales of cars in the country

cornering around 79.6% market share. With increasing competition from new entrants,

this market share has plummeted to almost 62% in FY2000.

A brief 3-year downturn till 1993 and car sales bounced back to register a 17 per

cent growth rate in 1997.Since then, the economy slumped into recession and sales of

cars remained quite stagnant FY97 and FY99. The Financial year 2000 has, however,

been the turnaround year for the Auto industry with the economy looking up. The

automobile industry, crossed the half million mark for the first time in FY2000.

Overwhelmed by newer models from new and existing players had led to an impressive

shift from a constrained supply situation to a surplus one. Within the past decade, about

30 models have entered the Indian market with a number of models still awaiting

launch. The de-licensing of auto industry in 1993 opened the gates to a virtual flood of

international auto makers into the country with an idea to tap the large population. Also

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the lifting of quantitative restrictions on imports by the recent policy is expected to add

up to the flurry of foreign cars in to the country.

The Indian Automobile industry registered one of the strongest growth rates in

FY04. Aided by sustained economic recovery, the industry registered high growth rates

in all major segments.

The growth story was led by Medium and Heavy Commercial Vehicles

(M&HCVs) registering a 40% growth while Light Commercial Vehicles (LCVs)

recorded a 32% jump in total sales. Passenger cars also registered an impressive 34%

growth in FY04 and total sales volume crossed the 1 million mark for the first time.

Interestingly, two wheelers registered the lowest but healthy growth rate of 13% in

FY04. While motorcycle volumes tripped on a high base, scooters registered a 10%

growth after 4 years of continuous decline. Three wheelers grew by 23% in FY04.

Profitability improvements were recorded in companies across segments driven by

rise in volumes and lower interest costs to some extent, notwithstanding the rise in prices

of certain inputs like steel.

Though the peak customs duty had been reduced to 20% in January 2004 and

Special Additional Duty was abolished, the domestic industry still enjoys adequate

protection, with no import threats. The potential borne by the industry is well exhibited

by the growing number of international players setting up base in India and increasing

competitiveness in the industry.

Many companies have entered the car manufacturing sector, to tap the middle and

premium end of car industry.

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Figure -Structure of Passenger Vehicle Market (India)

2 .History of Automobile Industry

The automobile as we know it was not invented in a single day by a single inventor. The

history of the automobile reflects an evolution that took place worldwide. It is estimated

that over 100,000 patents created the modern automobile. However, we can point to the

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many firsts that occurred along the way. Starting with the first theoretical plans for a

motor vehicle that had been drawn up by both Leonardo da Vinci and Isaac Newton.

In 1769, the very first self-propelled road vehicle was a military tractor invented by

French engineer and mechanic, Nicolas Joseph Cugnot (1725 - 1804). Cugnot used a

steam engine to power his vehicle, built under his instructions at the Paris Arsenal by

mechanic Brezin. It was used by the French Army to haul artillery at a whopping speed

of 2 1/2 kmph on only three wheels. The vehicle had to stop every ten to fifteen minutes

to build up steam power. The steam engine and boiler were separate from the rest of the

vehicle and placed in the front (see engraving above). The following year (1770), Cugnot

built a steam-powered tricycle that carried four passengers.In 1771, Cugnot drove one of his road vehicles into a stone wall, making Cugnot

the first person to get into a motor vehicle accident. This was the beginning of bad luck

for the inventor. After one of Cugnot's patrons died and the other was exiled, the money

for Cugnot's road vehicle experiments ended.

Steam engines powered cars by burning fuel that heated water in a boiler, creating

steam that expanded and pushed pistons that turned the crankshaft, which then turned the

wheels. During the early history of self-propelled vehicles - both road and railroad

vehicles were being developed with steam engines. (Cugnot also designed two steam

locomotives with engines that never worked well.) Steam engines added so much weight

to a vehicle that they proved a poor design for road vehicles; however, steam engines

were very successfully used in locomotives. Historians, who accept that early steam-

powered road vehicles were automobiles, feel that Nicolas Cugnot was the inventor of

the first automobile.

The automotive industry has certain trends it has to follow, just like fashion

designers and musical composers. In times of recession and decreasing sales there is less

room to take chances and manufacturers are prone to follow the common pattern as a

safer bet rather than releasing a controversial product or idea that might or might not be

successful. However throughout the automotive industry's history, great innovators have

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"boldly gone where no man has gone before" to set new trends which have dynamically

altered the industry as a whole.

1880's & early 1900's

About hundred years ago

-The first motor car was imported

-Import duty on vehicles was introduced.

-Indian Great Royal Road (Predecessor of the Grand Trunk Road) was conceived.

First car brought in India by a princely ruler in 1898.

Simpson & Co established in 1840.

-They were the first to build a steam car and a steam bus, to attempt motor car

manufacture, to build and operate petrol driven passenger service and to import

American Chassis in India.

Railways first came to India in 1850's

In 1865 Col. Rookes Crompton introduced public transport wagons strapped to

and pulled by imported steam road rollers called streamers. The maximum speed

of these buses was 33 kms/hr.

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From 1888 Motors Spirit attracted a substantial import duty.

In 1919 at the end of the war, a large number of military vehicles came on the

roads.

In 1928 assembly of CKD Trucks and Cars was started by the wholly owned

Indian subsidiary of American General Motors in Bombay and in 1930-31 by

Canadian Ford Motors in Madras, Bombay and Calcutta In 1935 the proposals of

Sir M Visvesvaraya to set up an Automobile Industry were disallowed.

1942 Hindustan Motors Ltd incorporated and their first vehicle was made in 1950.

In 1944 Premier Automobiles Ltd incorporated and in 1947 their first vehicle was

produced. In 1947 the Government of Bombay accepted a scheme of Bajaj Auto to replace

the cycle rickshaw by the auto and assembly started in a couple of years under a

license from Piaggio. Manufacturing Programme for the auto and scooter was

submitted in 1953 to the Tariff Commission and approved by the Government in

1959.

In 1953 the Government decreed that only firms having a manufacturing

programme should be allowed to operate and mere assemblers of imported CKD

units be asked to terminate operations in three years.

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Government continued with its protectionism policies towards the industry.

In 1956, a company entered the Indian market with a program of manufacturing

Commercial Vehicles, and Simpson for making engines.

1960's

In sixties 2 and 3 Wheeler segment established a foothold in the industry.

Escorts and Ideal Jawa entered the field in the beginning of sixties.

Association of Indian Automobile Manufacturers formally established in 1960.

Standard Motors Products of India Ltd. moved over to the manufacture of Light

Commercial Vehicles in 1965.

1970's

Major factors affecting the industry's structure were the implementation of MRTP

Act, FERA and Oil Shocks of 1973 and 1979.

During this decade there was not much change in the four wheeler industry except

the entry of Sipani Automobiles in the small car market.

Oil Shock of 1973 quickened the process of dieselization of the Commercial

Vehicle segment.

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Three other companies, namely, Kirloskar Ghatge Patil Auto Ltd, Indian

Automotive Ltd and Sen & Pandit Engg products Ltd entered the market during

1971-75. They ultimately withdrew in early eighties.

During the seventies the economy was in bad shape. This and many specific

problems affected the Automobile Industry adversely.

1980's - The period of liberalized policy and intense competition

First phase of liberalization announced.

Unfair practices of monopoly, oligopoly etc slowly disappeared.

Liberalization of the protectionism policies of the Government.

Lots of new Foreign Collaborations came up in the eighties. Many companies

went in for Japanese collaborations.

Hindustan Motors Ltd. in collaboration with Isuzu of Japan introduced the Isuzu

truck in early eighties.

ALL entered into collaboration with Leyland Vehicles Ltd. for development of

integral buses and with Hino Motors of Japan for the manufacture of W Series of

Engines. TELCO after the expiry of its contract with Daimler Benz, indigenously improved

the same Benz model and introduced it in the market.

Government approved four new firms in the LCV market, namely, DCM, Eicher,

Swaraj and Allwyn. They had collaborations with Japanese companies namely,

Toyota, Mitsubishi, Mazda and Nissan respectively.

Other three Car manufacturers namely, Hindustan Motors Ltd., Premier

Automobiles Ltd., Standard Motor Production of India Ltd. also introduced new

models in the market.

Ashok Leyland Ltd. and TELCO were strong players in the Commercial Vehicles

sector.

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In 1983-84 Bajaj Tempo Ltd. entered into collaboration with Daimler-Benz of

Germany for manufacture of LCVs.

Important policy changes like relaxation in MRTP and FERA, delicensing of

some ancillary products, broad banding of the products, modifications in licensing

policy, concessions to private sector (both Indian and Foreign) and foreign

collaboration policy etc. resulted in higher growth / better performance of the

industry than in the earlier decades.

In 1983 Maruti Udyog Ltd was started in collaboration with Suzuki, a Japanese

firm.

1990's

Mass Emission Norms were introduced for in 1991 for Petrol Vehicles and in

1992 for Diesel Vehicles.

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In 1991 new Industrial Policy was announced. It was the death of the License Raj

and the Automobile Industry was allowed to expand.

Further tightening of Emission norms was done in 1996.

In 1997 National Highway Policy has been announced which will have a positive

impact on the Automobile Industry.

The Indian Automobile market in general and Passenger Cars in particular have

witnessed liberalization. Many multinationals like Daewoo, Peugeot, General

Motors, Mercedes-Benz, Honda, Hyundai, Toyota, Volvo and Fiat entered the

market.

Various companies are coming up with state-of-art models of vehicles.

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TELCO has diversified in Passenger Car segment with Indica.

At the time there were five Passenger Car manufacturers in India - Maruti Udyog

Ltd., Hindustan Motors Ltd., Premier Automobiles Ltd., Standard Motor

Production of India Ltd. and Sipani Automobiles.

Despite the adverse trend in the growth of the industry, it is resolutely trying tomeet the challenges. Various issues of critical importance to the industry are

being dealt with forcefully.

In 2000-2007:

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According to World Bank data for 2002, India is the second largest country in the worldin terms of population with one of the largest economies in the world in terms ofpurchasing power parity measured in US dollars.

Since fiscal 2000, the GOI has carried out several strategies disinvestments in keyPSUs. The notable disinvestments that have been successfully carried out include sale ofGOI stakes in Videsh Sanchar Nigam Ltd. And CMC ltd. To the Tata group, Indianpetrochemicals corporation ltd. To the reliance group, IBP to Indian Oil Corporation ltd.And Bharat Aluminium company Ltd. And Hindustan Zinc ltd. To sterlite group. In may2007, Maruti completed a rights issue of its equity shares at Rs. 3280 per rs. 100 share,wherby GOI renounced its equity shares to Suzuki. The price at which the equity shareswere offered in the rights issue was determined by taking the average of the valuationsprovided by three independent firms, KPMG, S B Billimoria and Ernst & Young. Inaddition, Suzuki paid GOI a control premium of Rs. 10, 000. as a part of its ongoing

disinvestments process, GOI has initiated disinvestments in several key sectors such aspetroleum and shipping.

Most MNCs began their operations in India as joint venture with local partners,examples include Suzuki, GM; Ford and Daewoo. With the exception of Suzuki, thesejoint ventures have become fully owned subsidies of the foreign partners. In all thesecases, the local partners have just not had enough resources to chip in wherever the equity

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base has expanded. Consequently, the foreign partner have pumped in the additionalcapital and raised their equity stakes.

Maruti Escudo

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Maruti Udyog Ltd.

3. Introduction:

Maruti Udyog Limited is the premier car company in India. Maruti Udyog Limited

(MUL) was established in Feb 1981 through an Act of Parliament. The company enteredinto collaboration with Suzuki Motor Corporation of Japan to manufacture cars. Themain objective behind formation of Maruti Udyog Limited was to meet the growingdemand of a personal mode of transport caused by the lack of an efficient public transportsystem.

Managing director of Maruti Udyog Ltd.

Mr. Khattar

Today, Maruti Udyog Limited garners major share of automobile market in India. It hascompletely revolutionized the Indian car market and has brought out numerous models to

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cater to every section of society. These range from economy cars to Luxury cars to superSUVs.

MARUTI UDYOG LTD.TODAY:

Nineteen years back Maruti introduced the first small car in the Indian auto market. Theystarted with their model Maruti 800 which was very popular at that time and still itsmajor cash cow. The models, which were available at that time, were Premier Padminiand Ambassador. Customers were interested in having some different types of modelswith some fashionable looks. That was the perfect time to enter into market and Marutitook right step to introduce its different models. Maruti comes in a variety of models inthe small segment.

The sales figure for the year 1993 reached up to 1,96,820. The company reached a totalproduction of one million vehicles in March 1994 becoming the first Indian Company tocross this milestone. It crossed the two million mark in 1997.

To fend off growing competition, Maruti has recently completed a Rs. 4 billionexpansion project at the current site, which has increased the total production capacity toover 3,20,000 vehicles per annum. It has further plans to modernize the existing facilitiesand to expand its capacity by 1, 00,000 units in the year 1998-99. The total production ofthe company will exceed 4,00,000 vehicles per year.

Maruti registered sales of 39,838 units in April 2004, up 38.4% from 28,793 vehicleunits in April 2006. This includes 2,910 units of exports compared to 3,150 in April2009, decreasing by 7.6%.

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3.1 HISTORY OF MARUTI UDYOG LIMITED

The Early Days

The Maruti story began in the early 1980s when scooters had a waiting period and the

Indian car customer had limited options.

The Government of India identified the need for a small car for the Indian masses, a

car that would be economical, environment friendly yet contemporary in technology.

In short 'A people's car'

A global search for an efficient technology partner resulted in Suzuki -then the leader

in small cars in Japan being chosen for the now historical Maruti-Suzuki partnership.

Maruti's growth has been synonymous with the Indian auto industry. The inception of

Maruti in 1981 saw the growth of many automotive ancillary manufacturers.

The company set up a network of component vendors, dealers and service stations

and facilitated around 60 technical collaborations for Indian vendors from Japanese,

European and even American partners to upgrade technology and quality levels.

Along with this came the task of instituting quality processes and systems across this

network. Today, the suppliers to Maruti are huge corporations themselves and are

today in the global business arena. Through the years, Maruti brought in relevant

products to the market even before the market demands were visible.

From the very beginning, the growth of Maruti has influenced the growth of the

country as a whole.

HOW MARUTI UDYOG LIMITED BECAME A WORLD CLASS SMALL CARGIANT?

For a long time since the countrys independence in 1947, India had a protected market,divided between two players, Hindustan Motors and Premier Automobiles. (A thirdcompany, Standard Motors remained a marginal player for several years before beingwound up). Customers had little choice in what was an extreme version of a sellers

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market. In the 1980s Indias top politicians felt the need to produce a small car, whichwould be within the buying reach of the Indian middle class?

In the year 1980, Mr.Sanjay Gandhi forced Mrs. Gandhi to start an automobile company,which manufactures 100% Indian car. The opposition didnt let the Parliament work onthis issue and would boycott the parliament. Mr. Arun shourie (who is the divestmentminister, at present) criticized Mrs. Gandhis government for Sanjays venture andtermed MARUTI as MAA ROTO and further stated that Mrs. Gandhi will have to cryfor Sanjays venture. After rigorous opposition MUL saw its dawn in 1981 aftercollaboration with Suzuki motors of Japan. Maruti Udyog Limited (MUL) wasestablished in February 1981 through an act of parliament, to meet the growing demandof a personal mode transport caused by the lack of an efficient public transport system.The GOI entered the car business, with a 74% stake in Maruti Udyog Limited (MUL), thejoint venture with Suzuki Motors of Japan.

The obvious place to shop for technology was Japan, which had developed world-classcapabilities in small car by this time. It was not Toyota or Nissan or Honda, the threelargest players in Japan, with whom the Indian Government tied up, but Suzukis a muchsmaller company. Suzukis small car capabilities probably influenced this decision.Suzuki Motor Company was chosen from seven prospective partners worldwide. Thiswas due not only their undisputed leadership in small cars but also their commitment toactively bring it. MUL contemporary technology and Japanese practices (which hadcatapulted Japan over USA to the status of the top auto manufacturing country in theworld). A license and a joint venture agreement were signed between Government of

India and Suzuki motor company (now Suzuki Motor Corporation of Japan) in October.

1982 Suzuki grabbed the opportunity with both hands and a joint venture with the IndianGovernment, which was called Maruti Udyog Limited (MUL)

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MUL introduce Maruti 800in 1983 providing a complete facelift to the Indian carindustry. The car was launched as a peoples car with a price tag of Rs. 40,000. This

changed the industrys profile dramatically. It decided to launch a small car with anengine capacity of 800 cc, targeted at the masses. Suzuki showed its commitment bysetting up a fullfledged manufacturing facility at gurgaon and the India Capital, NewDelhi. With the various concessions offered by the Indian Government, the car, popularlyknown as the Maruti 800, was priced attractively. Subsequently, in spite of price hikefrom time to time, it remained within the reach of Indias middle class and became aunway success.

Currently, MUL sells about 15,000 unite of Maruti 800 per month. The Zen, MULS

second best selling car faces competition from Santro (Hyundai), Matiz (Daewoo) andIndica (Telco)_ the Omni, with us van like shape can seat upto eight people. The lowexcise duty on Omni (as per Government rules) makes it the cheapest personaltransportation vehicle in India. The Omni is inexpensive to run and is popular with taxioperators and large families. The 1000 cc up-market Esteem also offers value for moneywith a reputation for reliability and low running cost. With the entry of other MNCSespecially the Koreans both the Zen and the Esteem have been facing stiff competition inrecent times.

1983-1992

In December 1983 a sort of revolution happened in the Indian Automobile Industry.Maruti cool aborted with Suzuki motor of Japan to produce the first car for the commonIndian. The Indian car market at tie was stagnating with a volume of around 30,000 to40,000 cars for the decade ending 1983. It was only in 1985, after the entry of MarutiUdyog, that the carmakers wee given a free hand to fix the price of car, thus, effectivelyabolishing all controls relting to the pricing of the end product. The story of Marutibegins from 1983. The very face of the industry was changed forever in 1983 with theentry of public sector Maruti Udyog in a joint venture with the Suzuki Corporation of

Japan. Car sales grew by 42 percent in 1985 after Maruti 800 was launched. In 1985, GOIannounced its famous broad banding policy, which gave new licenses to broad groupsautomotive products like two or four wheeled vehicles.

1993-2001

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A decade later the sales figure for the year 1993 reached 1,96,820 and the companyreached a total production of 1 million vehicles in March 1994, becoming the first Indiancompany to cross this milestone. It further crossed the 2-million mark in 1997.

When Maruti entered the Indian car market, it sought to fill what it perceived as two veryglaring needs. One was to provide fuel efficient, low cost vehicles. Which were reliableand of high quality. The second was to offer customer-friendly sales and after-salesservice. Additionally, the absence of an efficient public transportation system waslending to a growing demand for passenger case. A burgeoning workforce and growingmiddle class population meant that personal transport had become a necessity. Over theyear Maruti Udyog has provided world-class contemporary Japanese technology, suitablyadded to Indian conditions and Indian car users.

2002-2007

Finally, in 2002, the Indian Government transferred its controlling share to Suzuki, whichputs Maruti Udyog Limited completely in extremely competent Japanese hands. Startingwith the humble 800, Maruti now has a number of cases UN every segment ofautomobile market. MUL extended its product range to include vans, Multi-utilityvehicles (MUVS) and mid sized cars. This country for a good number of years will bemall car market. Looking at the present Suzuki (the market leader foe the last 30 years inthe small car market in Japan with a 32 % market share and with a 22 % market share ofJapanese exports to Asia) as a strong supporter to Marutis business model. As

SUBSIDIARY Maruti has success to Suzuki expertise in the small car agreement. Marutiwith its dominate in this segment in India will greatly benefit from Suzukis expertise,global economies to scale, and its range of models in the small car segment, which willcontinue to be the largest segment in the Indian passenger car market in the foreseeablefuture.

3.2 CARS MANUFACTURED BY MARUTI SUZUKI

Maruti swift

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Maruti 800

Maruti Alto

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Maruti Baleno

Maruti Zen

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Maruti Esteem

Maruti Grand Vitara

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Maruti Gypsy

Maruti Omni

Maruti SX4

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Maruti Versa Maruti Dzire

Maruti Wagon R

Maruti Zen Estilo

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3.3 Over view of Maruti:

Maruti Udyog Limited (MUL), a subsidiary of Suzuki Motor Corporation is the largestmanufacturer of passenger cars in India with a combined market share of 54.6% at end offiscal 2003:

Focus on A and B passenger car segments with an extensive product portfolioComprising 10 models and more than 50 variants.

Single dominant player in a segment and a market share of 40.30% in Bsegment.

3.40 lakh cars sold during 2002 with exports accounting for 7.40% of total sales.

Authorized dealers and more than 1,500 service stations across the nation.

With a well-established brand backed by a twenty-year presence in the Indian market,the company continues to lead the pack in the small car segment. Currently, thecapacity utilization is at its maximum and the company targets a production of 5,

00,000 vehicles per year through additional capital expenditure.

COMPANY VISION:

The company vision is as under:

To become leader in Indian Automobile Industry.

Creating Customer Delight.

Becoming Shareholders Wealth.

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A pride of India.

COMPANY VALUES:

Customer obsession.

Fast, flexible & fast mover.

Innovation and partnership.

Openness and learning.

Networking and partnership.

OBJECTIVES:

As the leading manufacturer in the small car segment of the Indian market, Marutihave the following principle objectives:

To strengthen leadership position in the small car segment of the Indian market;

To continue to expand the size of the Indian market for small cars bystrengthening and expanding dealer network and making automobile financingavailable at competitive rates;

To continue to benchmark themselves against improving global manufacturing,

marking and other practices and standards, strive to increase customer satisfactionthrough quality products and new initiatives and promote the financial strength ofits dealer network.

Modernization of the Indian Automobile Industry.

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3.4 Organizational structure :

Shareholding and directors

Maruti udyog limited was set up as private limited company in 1981 pursuant toan Act of parliament and wholly owned by the Government of India. MUL was classifiedin the public sector as long as the equity of government of India remained over 51%. Alicense and joint venture agreement was signed in 1982; with Suzuki Motor Corporationacquiring 6% of the equity. SMC increased its equity to 40% in 1989 in 1992, Maruticeased to be a government company, as SMCs equity holding went up to 50%.

In 2005, SMCs share went up to 54.2%, converting MUL into a subsidiary ofSMC. The GOIs holding 18.3% subsequent to an offer for sale of 27.5% of the

companys equity to the public including institutional investors.

MUL is a Board managed company. Currently the directors on the board are:

Mr. Shinzo Nakanishi, Chairman.

Mr. Jagdish Khattar, Managing Director.

Mr. Junzo Sugimori, Joint Manager Director.

Mr. Kinji Saito, Director (Marketing and Sales).

Mr. R C Bhargava, Director. Mr. S V Bhave, Director.

The independent directors are:

Mr. Kumarmangalam Birla, Chairman, A V Birla Group.

Mr. Amal Ganguli, former Chairman, Price Waterhouse Coopers India.

Miss. Pallavi shroff, Senior Partner, Amarchand and Mangaldas and Suresh AShroff and co.

Mr. Manvendra singh banga, Chairman, Hindustan lever ltd (HLL).

Companys employees are MULs greatest strength and an asset. It is this underlyingphilosophy that has moulded companys workforce into a team with common goals and

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objectives. Companys Employee- Management relationship is therefore characterizedby:

Participative Management.

Team work and kaizen.

Communication and information sharing.

Open office culture for easy accessibility.

To implement this philosophy, Maruti has taken several measures like a flat

organizational structure. There are only three levels of responsibilities ranging from theBoard of Directors, Division Heads to Department Heads. Other visible features of thisphilosophy are an open office, common uniforms at all levels, and a common canteen forall. This structure ensures better communication and speedy decision making processes.It also creates an environment that builds trust, transparency and a sense of belongingamongst employees.

3.5 Infrastructure:

Factory land

The GOI acquired assets of Maruti ltd through the Acquisition Act. According tothe Acquisition Act, with effect from October 13, 1980, the GOI became the owner of allthe assets of Maruti ltd. The GOI transferred all the assets of Maruti ltd to Maruti udyogltd, including of which MULs manufacturing facilities are built.

Gurgaon Plant

MULs plant is located at Gurgaon in Haryana. It has an installed capacity of 3,50,000 vehicles.

Office property

MUL has a corporate office and several regional offices in New Delhi(corporate and regional- north 1), Mumbai (regional-west 1), Lucknow (regional-central),Guwahati ( regional-north east), Bangalore (regional- south), Chandigarh (regional-north2), Kolkata (regional-east), Chennai (regional-south) and Ahmedabad (regional-west 2).

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MUL has entered into either lease agreements or agreements of purchase for theseproperties. These agreements for purchase and lease agreements contain standard termsand conditions. MUL has constructed buildings covering an area of 3, 60,313 square

meters at our manufacturing factory.MUL has not taken any approval from the Director, Town and Country Planning,Government of Haryana for constructing these buildings.

3.6 Sales for April 2007:

Segment Models April

2007

April

2006

% change April'06

March'07

A1 M800 11,097 10,741 3.3% 167,561

C Omni, Versa 4,816 3,972 21.2% 59,526

A2 Alto, WagonR, Zen 19,296 9,668 99.6% 176,132

A3 Baleno, Esteem 1,313 952 37.9% 14,173

MUV Gypsy, Vitara 406 310 31.0% 3,555

Domestic 36,928 25,643 44.0% 420,947

Export 2,910 3,150 -7.6% 51,175

Total Sales 39,838 28,793 38.4% 472,122

The A1 segment has grown by 3.3% yoy from 10,741 units in April 2006 to 11,097 units.The A2 segment comprising of the Alto, WagonR and Zen registered a 100% growthfrom 9,668 units in April 2006 to 19,296 units, mainly driven by rising Alto sales. TheA3 segment has grown by 38% yoy to 1,313 in April 2007 from 952 in the same periodlast year.

The C segment comprising of the Omni and the Versa has shown a 21.2% growth yoyfrom 3,972 in the same period last year to 4,816.

In the multi utility vehicle (MUV) comprising Gypsy and Vitara, it sold 406 units inApril 2007 from 310 units in April 2006, a rise of 31% yoy.

SNAPSHOT OF MARUTI SUZUKI

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Incorporated February 1981

Joint Venture Agreement October 1982

Equity Structure 54.2% Suzuki, Japan, balance with Other

Financial Institution and Public

Sales (No of Cars) Financial year

2006-07

674, 924 including 39,295 exports

Sales (Net of Excise) Financial year

2006-07

INR 152.5 Billion , Yen 423.675 Billion ,

$ 3.499 Billion

Profit After Tax

Financial year

2006-07

INR 15.62 Billion, Yen 42.22 Billion , $

358.34 Million *

Employee Strength 4993 of Financial year 2006-07Facilities Gurgaon: 3 vehicle assembly plants

Manesar: 1 vehicle assembly plant

Head Office in New Delhi, India

Regional offices: 16

Diesel Power train Plant Suzuki Powertrain India Limited (SPIL),

Joint Venture between Suzuki Motor

Coroporation 70% Equity the rest is with

Maruti Suzuki India Limited.

Global hub for Diesel engines and

transmissions for Suzuki worldwide.

Joint Venture 15 Joint Venture companies, including

Suzuki Powertrain India Limited for

component supply.

Subsidiary Companies True Value: for sale and purchase of

preowned cars

Maruti Insurance: for insurance of Maruti

vehicles (four companies)

Maruti Finance: for financing Maruti

vehicles

Proposed Investments till 2010 INR 9000 Crores i.e. INR 90 Billion, Yen

257 Billion ( 1Yen = 0.35 Rs), $ 2.25

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Billion (1 $ = Rs 40)

Network Reach

Financial year2006-07

Sales 398 Outlets covering 228 cities

Service 2421 workshops covering 1193cities

Pre-owned Car Sales 242 dealers covering

148 cities

$ at the rate INR 43.59.

Yen at the rate INR 0.37

Maruti Suzuki Exports

As a forward looking organization, it have always encouraged exports to remain

competitive in global markets. An exposure of global markets always comes handy in

improving product quality and cost.

This is why, in 1986 despite a 3-year waiting period in the domestic market, it started

exporting cars, only to ensure that it remains competitive in terms of cost and quality.

Similarly, Alto received rave reviews in Netherlands, Greece, Germany and Switzerland.

However, due to adoption of new emission norms it had to temporarily suspend the

exports to European countries and then began developing a new model for European

markets.

At present, it exports entry level models to many Latin American and African nations.

With a heavy focus on Non-European countries it has managed to bring incremental sales

and the exports to these countries have grown by 47%, 65% and 40% in the past three

years.

3.7 Suzuki Motor Corporation

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Suzuki Motor Corporation, with headquarters in Hamamatsu, Shizuoka, Japan is theleading international manufacturer of compact cars. The Company employs some 45,510people worldwide. And it is represented in over 192 countries and areas. Suzuki has 35

main production facilities in 23 countries.Today, the Suzuki brand is synonymous with 'value-packed' products, which offerquality, reliability and originality. An integral part of the Suzuki concept to deliver'value-packed' products lies in ensuring that the company use the most modernmanufacturing equipment and technologies together with factory workers and engineers.In addition, various activities are aimed at continually enhancing productivity, strictquality controls and effective communication.Suzuki positively tackles environmental issues with all its products and businessactivities. Suzuki is continually carrying out research for the further development of four-wheel vehicles particularly in the improvement of fuel economy and the reduction of gasemissions and noise.

Osamu Suzuki director of Suzuki corp.

4. A LONG STANDING PARTNERSHIP

4.1 SUZUKI AND MARUTI

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Suzuki Motor Corporation is the largest manufacturer of mini cars in Japan sincefiscal 1974, in terms of sales volumes, with a market share of 31.6% in 2002, accordingto Japan Mini Vehicles Association. Suzuki was also the eleventh largest vehiclesmanufacturer in the world and the fourth largest manufacturer in Japan in terms of worldwide sales volumes in 2000, according to Automotive Intelligence in 2002,Suzuki had a

22% share of the market in Asia vehicles exported from Japan, according to the JapanAutomotive Manufacturer Association.

Suzuki has always played, and continues to play, an important role in themanagement of MUL. Some of MUL key management personnel and technical personnelare deputed Suzuki. Currently, two of MUL directors of Suzuki. IN 1982,Suzuki acquireda 26% stake in MUL since then; Suzuki has increased its stake in MUL and currentlyholds about 54.2%. Suzuki provided MUL access to some of their products, licensed theirtechnology, shared with MUL, their best practices in manufacturing process and helpedMUL develop and manage supply chain. Suzuki has also provided support 1 training

MUL personnel and integrating Japanese management practice such as Kaizen inproduction plants.

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MUL is a subsidiary of Suzuki Motor Corporation, the largest manufacturer of

mini passenger vehicles since 1974 in India. Suzuki is the also the eleventh largestvehicles manufacturer in the world and the forth largest manufacturer in Japan. Suzuki isbest known for building small compact cars and giving customers the advantage of bigcar packed into a small frame.

Suzuki increased its equity stake in MUL from 26% to 40% in 1989 and further to50% in 1992, converting MUL into a non-government company. MUL made a RightsIssue of 1,219,512equity shares of Rs. 100/- each in May 2002, at a price per share of Rs.

3,280/-, which led to an increase in Suzukis stake to 54.2%. In addition, Suzuki paid acontrol premium of Rs. 10bn to the government of India and management control nowvests completely with Suzuki Motor Company, Japan.

5. JUST THE RIGHT MIX

5.1 Marketing strategies:

Marketing objectives:

Marutis marketing objective is to offer the customer new products and servicesthat:

Reduce the customers cost of ownership of cars; and

Anticipate and address the customers need and preference in all aspects andstages of car ownership, to provide what MUL refer to as the 360 degreecustomer experience.

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Business strategy:

MUL intend to continue to focus on the small car segment, while offering in mostsegments of the Indian passenger car market. MUL aim to achieve principleobjectives by pursuing the following business strategies:

Maintain and enhance our product range.

MUL intends to utilize Suzukis expertise in small car technology to produce newvariants of exciting models and to upgrade other products with contemporary technologyand features.

Increase reach and penetration.

MUL plans to continue to utilize their extensive sales and service network to

increase the reach , in terms of geographical spread, and penetration , in terms of sales,volumes, of products across India.

Increased availability of Automobile Finance.

MUL continues to seek opportunities to expand the size of the Indian passengercar market, especially in the small car segment, through facilitating easy availability ofautomobile finance to the end, they have recently entered into an agreement with theState Bank of India.Continue to reduce costs to offer more competitive products.

Cost competitiveness continues to be, central to one of MULS strategy as the

leading manufacturer in the small car segment to expand the size of the market byoffering competitively priced, high quality products.

The conditions of this strategy are:

Higher levels of localization.

Vendor participation in cost reduction.

Cost reduction on warranties.

Reduction in initial investment cost.

Reduction in number of vehicle platforms.

Achieve further cost reduction through higher productivity.

DEMAND DRIVERS:

The key factors that determine demand for cars are:

Household income levels.

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Product availability and access.

Product affordability.

Availability of finance. Infrastructure {road} development.

All the above factors are prevalent in the Indian market toady, rising incomelevels low passenger car ownership, declining rates, easier availability offinancing options, ongoing road development, reduction in excise duties andavailability of multiple models in all price segments are all triggered for a highgrowth phase in the passenger car industry in the coming years.

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5.2 Segment Of Cars

Segment A

This is the entry-level and the most prices sensitive constituting 35.7% of the totalIndian passenger car market in fiscal 2007.Maruti is the sole manufacturer in this segment since fiscal 2006.In the fiscal 2007, this segment accounted for the sales volume of 206- 350 cars. Due tothe low per capita income levels in India, the price of ownership of cars significantlyaffects the demand for cars.

Segment B

In the fiscal 2007, this segment constituted 50.8% of the total Indian passengercar market and is expected to grow to 57.8% of the Indian passenger car market by fiscal2009 at a Cagar of about 12.3%. In the fiscal 2006,There were 8 models in this segment. Due to the present low per capita income in India,the price and cost of ownership of cars are significant factors that affect demand for carsin this segment.

Segment C, D and E

In the fiscal 2007, segment C, D and E constituted about 13.5% of the total Indianpassenger car market. There are 11 manufacturers with approximately 20 models in thesesegments. These segments typically have low sales volumes, therefore high growth ratesof 11%, 19% and 35%, respectively, are expected between fiscal 2007 and 2009. Newlaunches, growth in pr capita income levels, high aspirations and status associated withlarger cars, are the key factors affecting demand for cars in these segments.

5.3 FACTORS FOR KEY SUCCESS OF CAR INDUSTRIES

Carmakers have realized that an optimum mix of three of critical factors hasbecome quite essential for ensuring success of their vehicles on Indian market roads.

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These three factors gain precedence in the context of the Indian market and hence arevery important for us to understand.

Indigenization

This is a relatively new concept and in essence refers to components of thevehicles that are manufactured in India. Interestingly, indigenization levels play a veryimportant role in determining the sales- mix of a manufacture. Especially since higherindigenized content helps keep costs down, thus making this factor a critical pricedeterminant.

Segmentation

At the heart of making any strategy has to be the basic tenets of STP marketing,viz; segmenting, targeting and positioning. Steps in an STP strategy include:

Market segmentation

Identify segmentation variables and segment the market. Develop profiles ofresulting segment.

Market targeting

Evaluate the attractiveness of each segment. Select the target segment.

Product positioning

Identify possible positioning concepts for each target segment. Select, developand communicate the chosen positioning concept. The emergence of segmentationis largely due to the fact each buyer is potentially a separate market, where incarmakers need to understand that the buyers differ in their wants, needs,purchasing power, geographical location, buying attitudes and buying practices.

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Keeping this in mind, the Indian Automotive market has been historicallysegmented into a basic three-tier structure; the small car segment, the mid sizedsegment and the luxury sedan segment.

Pricing

This is the last of the troika of factors for the Indian automotive market and untilrecently, was the most important factor for success in India. Price as an aspect thathas been critical in ensuring MULs runway success in the small car segment, so,Indias largely mythical 200-million strong middle class has proven time andagain that it is more concerned about price than anything else.

5.4 Strategizing with the 4 Ps

The marketing strategy is a section, which outlines a game plan to achieve marketingobjectives. It is, essentially, the heart of the marketing plan. The marketing strategysection should include information about:

Product

Price

Promotion

Place (distribution)

Product mix

MUL product mix is decided on the basis of the opportunities available in themarket, the motor vehicles regulation, their own core competence and the areas ofcomparative advantages. No wonder then that MUL is the undisputed price leader in allthe three segments that it services viz; the small car segment with the 800cc, the mid-sized segment with lowly priced Esteem and the utility segment with the Omni andGypsy.

Design specification

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Promotion mix

A promotion plan describes the tools or tactics used to accomplish marketingobjectives. MULs vehicles are promoted by themselves or by their distributor in variousways. Partial lists of promotional tools are listed below:

Advertising:

Print advertising such as that in programs for events, trade journals, magazines,newspapers.

Direct mail

Outdoor advertising, such as bill boards and bus board.

Broadcast advertising on radio, T.V. or internet

Press advertisements

Radio advertisements

TV advertising

Marketing collateral distributor materials such as:

Brochures

Newsletters

Fliers

Posters

Hoardings

Road shows

Promotional activities:

Sponsorships for special events {like fun runs}.

Participation in community projects and board of directors.

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Trade shows- product is suited to exhibiting at a trade show attendee by targetaudience. Trade shows are typically one-or-two day events that allows business toset up exhibits or booths showcasing their products or capabilities.

Coupons and free samples

Conducting contests.

Participation in the trade airs and exhibitions e.g. the Alto was displayed in theGeneva Motor show in March 2004.

Sponsorship and special promotion events e.g. Around the world in Gypsy tour was undertaken by two environmentalists to spread the Green Earthmessage, Kenya Golf Trophy, etc.

Point of promotion displays.

Public speaking and conferences making speeches at conferences, professionalassociation meetings and other events, positions company as a leader in this field.

Company probably also make valuable contacts that lead to sales.

Publications such as newsletters, trade journals and books.

Media relations campaigns:

A campaign is an overall plan for contacting and staying in touch with targetedmembers of the media [reporters]. To develop a media relation campaign, it wouldbenefit the company to be mentioned in the newspapers, magazines or TV broadcastsviewed by target audience. Developing press kits and public service announcements arein media relations campaign.

Media:

It depends on the market and the season. In some basis markets, press advertisement is

dominant. In other electronic media advertising, though costlier, is more effective. Atfestival times, special promotions, displays, etc. are effective. Hence the method ofpromotion has to keep rotating. The expenditure incurred for promotion is in therelationship with the spread and depth of the advertising campaign, and the cost standardsin a market.Normally the respective country distributor handles this. On a long run, they believe thatno company, which wants to remain solvent, can afford to these costs.

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6. PLEASING THE KING

6.1 CUSTOMER INTERFACE

After sales and Dealers Network

Maruti has the largest network of dealers and service stations amongstall car manufactures in India. Maruti has 178 authorized dealers with 243 sales outlets in 161

cities, 342 dealer workshops and 1545 Maruti Authorized Service Stations (MASS) covering898 cities, and express service centers on 30 highways across the country. Clearly, thecompany is extremely well positioned in the competitive landscape. MARUTI UDYOG(MUL) is making a renewed foray into the company owned service stations and has drawn upplans for enhancing its reach in this segment nationwide. At MUL, the last two years have beenan increased focus on customer delight, one initiative, for instance, has been the setting up ofcompany authorized service stations along eight major highways this year. The workshops willbe monitored regularly by MULs service engineers and regional representatives, as also thenetwork section at the company.

Maruti is of course, the number one car brand in India. Maruti

continues to sell more cars than all their competitors put together. They are at the top positionin customer satisfaction for three years in a row. Improvements in product quality and thelaunch of new business have further strengthened this brand in recent years. The J>D>PowerAsia Pacific report for three years from 2000 to 2002 ranked Maruti No.1 in India on itsCustomer Satisfaction Index, which customer satisfaction with product quality and dealerservice.

6.2 DEALERS AND WORKSHOPS:

1999-2000

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There were 1840 services outlets spread across 788 cities, which have not been able to coverthe entire population of Maruti vehicles. The dealers have been catering to 25% and authorizedservice stations around 29% of the market

2000-2001

During 2000-01 there were 301 dealership and 1328 Maruti authorized service stations. Duringthe year, Maruti Udyog service network has expanded from 1684 workshop spread across 695cities in 2000 to 1840 workshops spread across 788 cities during 2001.

2001-2002

During the year 2001-2002 it increased to 307 dealership and 1532 authorized centers during

2001-02, these dealerships are expected to maintain high standards of service, with thecompanys customer satisfaction index targeted at 80% company aims.

Unparalleled Sales and Service Network

The company has the largest and the strongest dealer network in the country. MUK has 182Authorized Dealers with 243 sales outlets in 161 cities. The company has around 342 dealerworkshop and 1545 Maruti Authorized Services Station backed by Express service station on30 highways across the country. The companys dealership network is a critical resource in itseffort to provide customer with one stop shop for automobiles and auto related products and

services like finance, car insurance, etc. Sales outlets in 2003 appear lower than previous yeardue to ongoing revamp of distribution, wherein close to 17 inefficient outlets have been woundup and close to 20 new dealerships have been warded to existing efficient dealers.

6.3 SYSTEM & SCHEME FOR DEALERS

MARUTI SOFTWARE:

Maruti seems to be well ahead of the other players in the industry in its e-business initiatives. It

has created a portal, MARUTI SOFTWARE, where business partners can log in with theirunique passwords. Enquiries can be floated electronically to qualified vendors: quotationsreceived and order processed through the internets soon as a vendor supplies goods, Marutissystem and the vendors books are updated. Information regarding acceptance of aconsignment is also conveyed electronically. Maruti is attempting to integrate its internalMaruti software system with the web so that production schedules can be given online for thedifferent vendors. Service center managers have to have day to day feed of their data and workout.

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MARUTI PROVIDES TRAINING

Maruti has established standard operating, showroom ambience and service quality standardsfor dealerships. Maruti provides periodic training through its training centers located at theirmanufacturing facility and at Chennai, Kolkata, Guwahati and Pune. Maruti trained more than2600 and 3400 dealer sales personnel in fiscal 2002 and fiscal 2003, respectively. For fiscal2002, their top dealer and their top 10 dealers accounted for 3.4% and 18.4% respectively, interms of value of products sold to such dealer, of their domestic, sales of vehicles.

Dealers, Service Center Managers, Management Staff, Workers Customer Relation Managerall are giving training in regard of customer delight, customer care and customer service.Maruti is truly a customer-oriented company.

Enhancing Dealer Performance

The companys central office is in Delhi, regional offices and is offices monitor and assist thedealer network. As of March 31, 2003, it had nine regional offices, five area offices and 187

sales and marketing personnel. Maruti follows the performance of dealers and frequentlysuggest improvements. In order it assist dealers in enhancing their performance andcapabilities, they have introduced a concept of Balanced Scorecard. Using this tool, seeks tomeasure the performance of a dealership in several areas of operations, including systems.They reward dealers who perform well on the Balanced Scorecard. Serves as an effectiveincentive for dealers to enhance their performance.

MUL Has Set up Integrated Service Outlets under MSM Brand Name

Maruti Udyog has established the Maruti Service Masters (MSM) brand name in the country,by setting up service outlets that will serve4 as a benchmark for its dealerships and companyauthorized centers. By creating a brand identity of its own, the MSM franchise will provide aone-stop for customers, where all diverse vehicles needs, such as servicing, spares, accessories,insurance related issues and warranty would be met under one roof. The company is planningto set up 15 franchisees of Maruti Service Masters in the next fiscal across various cities.Review done by the Maruti revealed that there is a hue untapped potential with 50% of theMaruti vehicles population not being covered by either the companys dealers or authorized

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center. The company saw an opportunity in the untapped potential in his car servicing industry,and decided to develop the MSM concept, which would set new benchmark in customerservice and provide.

International standards in the outlets. The MSM concept is also being developed pace withtechnological improvements in vehicles, such as multipoint fuel injection systems and emissionnorms, and up gradation in the service network to keep pace with international standards.

MUL FINANCE FOR CARS:

Maruti has partnered with the leading Finance companies in India to provide highly attractiveFinance deals to its customer through its dealers. Maruti Finance is the program under whichthese deals are being offered exclusively to customers of Maruti vehicles. Maruti has partneredwith the top Finance companies in India, so that its customer gets the best possible service andrates. The alliance partner Finance companies for Maruti Finance are Citicorp Maruti FinanceLtd, Maruti Countrywide, ICICI bank, HDFC bank, Kotak Mahindra, ABN Amro bank, SCBand Sundaram Finance, SBI Maruti cars loan. The Maruti Finance offer to its customer isdifferent from other offering in the market in 4 key ways:

Value Added Services.

Higher Loan Amounts.

Convenience & Transport Deals.

Best Internet Rate.

Extended warranty schemes.

WHAT IS TRUE VALUE? True value for customers old cars

Pre-owned business

True Value is Marutis pre-owned cares business, launched in Oct 2001 is conducted under thebrand name Maruti True Value. Marutis pre-owned car business is a significant marketing

tool to retain customers and reduce their cost of ownership, and acquire new customers. Thiscan be achieved by creating an organized market for the resale of the pre-owned cars, wherethe value of the pre-owned car is assessed in a more transparent manner and Maruti certifiesthe car. While the central intermediary to the transaction is a dealer, Company plays advisoryrole in conducting technical.

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Evaluation, estimating the refurbishment cost and providing certification and warranty to thebuyer of the pre owned car. The warranty given the buyer of the pre owned car is covered byan arrangement with insurance companies. Prior to certification, every car passes through a 120

point check, which includes verification, the sellers credentials. The refurbishments of preowned cars which re under Maruti True Value improves the utilization rates of dealerworkshop and other Maruti True Value outlets and also increase the sales of spares.Company receives from dealers a proportion of their revenue, net of cost refurbishment of thepre owned car. As on March 31, 2003: Maruti True Value operated from 50 dealer ownedoutlets spread over 34 cities. An additional 30 dealers owned outlets are at various stages oflaunch.

True Value Benefits both Buyer and Seller:

Advantages buyer: Maruti True Value offers its customer the widest range of quality preowned cars, acquired from genuine sources refurbished with Maruti Suzuki Genuine Part andwith complete service backup. Besides a solid warranty program. Every True Value car is reconditioned to Maruti Suzuki standards in state of the art workshops by trained mechanicsusing only Maruti Suzuki Genuine Parts.

Advantages Seller: Companys transparent evaluation process makes sure that gets the rightprices and gets paid quickly. They even take care of the documentation and ensure that whensellers car is resold, it goes into the right hands. Sellers also get to choose from a range of

attractive exchange options seller could opt for a True Value pre owned car or brand newMaruti. Maruti True Value is a place that works on the principals of speed and services.

N2N Fleet Management:

Maruti has a new N2N Fleet Management solutions for companies, that takes care of the A toZ of there automobile problems. Company fleet services include end to end backups solutionsacross the vehicles life. Leasing, Maintenance, Convenience services and Remarketing. Whenclients lease a fleet from MARUTI, they get vehicles in prime running condition plus an

attractive lease EMI. Company uses the state of the art maintenance services for ensuring thatits clients vehicles are in excellent shape and give a great ride. Besides Fleet Solutions forcompany owned scar, Maruti also offers this service for employee owned cars.

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7. SPEED AND SPEED BREAKERS

STRENGHTS AND WEAKNESS OF MARUTI

SPEED:

Despite new entrants, MUL has maintained its market leadership in the passenger car

industry, with annual volumes exceeding the combined volumes of all other players puttogether.

The bread and butter Maruti 800 segment, which it has totally dominated till date.

MUL has a 55% market share in the largest selling A&B segments, which account for85% of cars sold in the Indian market.

Unparallel sales and service network, which is larger than all the other players puttogether.

Change in Management control from Government to Suzuki to enable quicker responseto market. MUL to be established as an Asian hub for R&D to cater to Suzukis Asianmarkets by 2007.

MUL is also waking up to the changing profile of the Indian car market by introducingnew models

TRANSFER OF TECHNOLOGY

Every minute two vehicles roll out of the Maruti Plant. It is therefore imperative that thetransfer of contemporary technology from partner Suzuki is a smooth process. Great stress islaid on training and motivating the people who manage and maintain the equipment, since thebest equipment alone cannot guarantee high quality and productivity. From the beginning itwas a conscious decision to send people to Suzuki Motor Corporation for on the job training

for line technician, supervisors and engineers. This helps them to imbibe the culture in a waythat merely transferring technology through documents can never replicate. At present 20% ofMarutis workforce have been trained under this program.

Maruti Genuine Accessories: The Advantage

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Maruti Genuine Accessories (MGA) is a new initiative to offer customers high qualityaccessories at competitive prices. Company follows world Class engineering and designProcesses to develop each and every item of MGA. Many of these items are imported from

Suzuki, Japan. Every MGA item has perfect mechanical and electrical compatibility with thevehicles and offers unmatched performance.

SPEED BREAKERS:

Lack of diesel variant restricts MULs growth in the second largest B segment, where

estimates 335 of sales are of diesel models.

Another problem that faces is largely of its own making. It had left the basis 800 modelunchanged for over 15 years, leading to a growing consumer perception that it wasoffering older models unlike its competitors.

MULs market share and profits have declined due to the new entrants in the marketespecially in the B segment.

MUL operates in a highly competitive environment and competitive pressure on itsbusiness is a very important weakness.

MUL is substantially dependant on the Maruti 800, which comprises 42.5% ofdomestic sales volumes.

Suzuki has the ability to exercise significant control over MUL and its interests anyconflict with shareholders interests.

Potential delays in the launch of new models in the market and lower than anticipatedmarket acceptance of new or existing models cause MUL to lose market share andadversely affects result of operations.

MUL is dependent on its dealership network for the sales and distribution of products.

Breakdowns in information technology based communication systems may disruptMUL operations.

MULs failure to anticipate, or adapt its business to, consumer preferences in theautomobile industry adversely affects its business and leadership position in the smallcar segment.

MULs performance is linked to the performance of the Indian economy and thepassenger car industry in India.

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8. THE CHALLENGE

MAJOR COMPETITORS

1) HYUNDAI:

Introduction to the Company:

Incorporated on May 6, 1996 as a 100% subsidiary of Hyundai Motor Company(HMC), S>Korea, Hyundai Motor India Limited (HMIL) set up a 1.2 lakh per annumcapacity fully integrated passenger car manufacturing facility at irrungattukottai,

Sriperumbudur, near Chennai at an estimated cost of Es. 16bn. The capacity includespress shop, body shop, paint shop, engine and transmission manufacture and finalassembly line. This is the first fully integrated production facility outside Korea and thesecond largest after its recently set up facility at Alabama, US. HMIL chose its presentlocation primarily because of nearness to the port at Chennai, availability of a strongauto-ancillary base in and around Chennai and strong support from the Tamilnadugovernment in the form of infrastructure and sales tax exemption. The unit has beencommissioned in a record 17 months timeframe and HMIL launched its first car in theIndian market in October 98 in the form of Santro. HMIL strongly draws on theexperience of its parent in terms of manpower support. Experienced Korean hands areheading almost all the key business function and they are being aided by top-notch Indian

professionals drawn from the domestic auto industry.

HMC is the part of the Hyundai group the largest chaebol of Korean having31 affiliates abd employing more than 1,80,000 personnel worldwide. The group had itsorigin in 1947 and major presence in automobiles, electronics, petrochemicals, heavyindustry (including shipping and industrial plant construction), iron and metals and

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engineering construction sector. The group also has presence in shipping, distribution andtrading and financial services. Incorporated in 1967, HMC commenced operations formFebruary 1968 with technical inputs from Ford. HMC developed the first independently

designed and manufactured Korean car the Pony in the early 70s. Its was the firstKorean automaker to the North American in 1984 with its Pony II. IT is the biggestKorean manufacturer of passenger cars and commercial vehicles and occupies theposition in the world in terms of sales of passenger cars.

Positive Aspects:

Parental support.

Strong marketing skills.

Impressive track record in India.

Strong liquidity and adequate bank lines.

Overview of HMIL:

HMIL is presently in the entry level, mid-size and premium segments of thepassenger car market in the India. These segments are labeled as B, C, and D

segments in the industry parlance. HMIL has been successful in its performance in all these segments, more so

in the B segment where it has its car named Santro. HMILs success can beattributed to its detailed market research, its policy of bringing to the Indiancustomer the latest in technology and its highly efficient marketing game plan.

Unlike other MNC competitors, HMIL recognized the Indian customers needfor an affordable small car. Maruti Udyogs experience for nearly one and halfdecades did help HMIL in the confirming its market findings that there areabundant volumes in the small car segment.

Further HMILs profitability has been commendable due to its policy ofkeeping fixed costs to a minimum and outsourcing all requirements of

components to its satellite network of vendors situated close to its satellitenetwork of vendors situated close to HMILs factory. Increasing over theyears boosted profits future.

Continued support from HMC in the form of technology transfer,management inputs and equity infusion has made a positive contribution toHMIL.

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STRATEGY OF HYUNDAI:

HMILs strategy has been to penetrate the Indian passenger car marketwith low price offering. HMIL has been able to keep costs down throughoutsourcing most of the parts production to its vendors. Due to a low contributionis high for every car sold. HMIL also got its marketing act together and as aresult, could sell high volumes of its small car. HMIL could replicate this successstory in the mid-size segment with its Accent model. Introduction of Sonata in thepremium segment has segment with its Accent model. Introduction of Sonata inthe premium segment has also been a success with HMIL reporting highervolumes vis--vis its competitors like Ford India and Honda. A key element ofHMILs strategy is to offer the Indian customer the latest technology in passengercares at an affordable price.

Tools and techniques:

Typing up with dealers for conducting road shows.

Offering test-drives and options in cars.

Upgrading car technologies.

Credit car purchase deal in addition with offering on the spot financialassistance.

To make buyers aware of the quality of cares and to the shift them toHyundai cars.

Strong service network.

Points That Made Hyundai String in Indian Market:

Small products range only one car at each segment.

They had overall sale efficiency as compared to its other competitors.

They understood there consumers, consumers need tried there best tosatisfy all there demands.

Hyundai works on to its theme line that is WE ARE LISTENING

Since they had fewer models they had very low inventory cost ascompared to Maruti.

Hyundai because 2nd largest in India 19th months after its entry byoffering high quality technology that to at an affordable price.

Hyundai has a strong parentage support.

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2) TATA MOTORS.

Introduction to the Company:

Founded in 1945, the Tata Engineering and Locomotive Company(Tata Motors) are one of the leading playing in the Indian automobileindustry. In its early years, Tata Motors manufactured only commercialvehicles, through a technical collaboration who Mercedes Benz of Germany.Stating with the 1980s, Tata Motors has moved into high commercialvehicles, pick-up trucks, multi-utility vehicles, large cars and finally, smallcars and finally, small cars. The Tata Mobile pick-up truck launched in 1988

was probably a turning point in Tata Motors history. The model failed to buildvolumes, but gave Tata Motors engineers confidence in their designcapabilities. Tata Motors then launched its big cars. Tata Sierra (1991) andTata Estate (1992).

Both these cars have been more or less phased out, as Tata Motors decided totake a plunge into the mass market small car segment1, the star in TataMotors portfolio today is the small car, Indian designed in Italy, butmanufactured in India as an almost completely indigenous effort. The car hasa distinctive look and sufficient space but its engines can probably be

improved. At the time of launch, the India was plagued by quality problems.Tata Motors engineers, however, ironed these out in quick time. Priced at justover Rs.3 lakes, the Indica offers value for money and has catapulted TataMotors to a position in which it is one of the few serious challengers to MUL.In the Rs.3 - 4.5 lakes price segment consisting of the Santro, the Zen, theMatiz, the Wagon R and the

Documents

Automobile Industry With Respect to Maruti Suzuki