Passenger Cars

Project Report Marketing Management - 1Sector:: Durables::Passenger Cars

Maruti Suzuki:: Compact SUVs

Submitted to:

Prof. Bhalender Singh Nayyar (Group 3):

Akshay Bhardwaj (073003)

Dinesh Aggrwal (073016)

Hardik Marfatia (073029)

Piyush Karla (073043)Shiv Ram Krishna Pande (073053)Industry Competitive AnalysisIntroduction:The automotive industry in India is one of the largest in the world and till recently, had been one of the fastest growing sectors of the economy. Its recent history showcases its strengths as in 2009; India emerged as Asia's fourth largest exporter of passenger cars, only behind Japan, South Korea, and Thailand. In 2010, India beat Thailand to take the number three spot in the same rankings. In 2010, More than 3.7 million automotive vehicles were produced in India in 2010 (an increase of 33.9%), making the country the second (after China) fastest growing automobile market in the world in that year and taking the total number of automobiles in the country to a staggering 40 million.

2011 saw Indias passenger car and commercial vehicle manufacturing industry overtake Brazil to become is the sixth largest in the world. To put it in numbers, the Indian automotive industry produced around 3.9 million units in 2011, sold around 3 million units of the same and grew at the rate of 16-18 percent during the course of the respective financial year. Its rank of sixth beats some of the heavyweight nations such as United Kingdom, Italy, Russia, Spain and France.

However, the industry remains extremely susceptible to global trends and shocks. It grew at along with the rest of the world and now is showing definitive signs of a slowdown under strained global economic conditions. This sentiment is typified by Society of Indian Automobile Manufacturers (SIAM), which projects annual vehicle sales to rise by increase to 4 million by 2014 and not 5 million as was previously projected. Yet, given the rising levels of disposable levels of income in the country, the industry remains bullish on the long term and the production of passenger vehicles in India that was recorded at 3.23 million in 2012-13 is expected to grow at a compound annual growth rate (CAGR) of 13 per cent during 2012-2021, as per data published by Automotive Component Manufacturers Association of India (ACMA).

The majority of India's car manufacturing industry is based around three clusters in the South, West and North. The southern cluster consisting of Chennai is the biggest with 35% of the revenue share. The western hub near Mumbai and Pune contributes to 33% of the market and the northern cluster around the National Capital Region (NCR) contributes 32%.Chennai houses the India operations of Ford, Hyundai, Renault, Mitsubishi, Nissan, BMW, Hindustan Motors, Daimler, Caparo with PSA Peugeot Citron is about to begin their operations by 2014. The city also accounts for 60% of the country's automotive exports. Gurgaon and Manesar in Haryana form the northern cluster where the country's largest car manufacturer, Maruti Suzuki, is based. The Chakan corridor near Pune, Maharashtra is the western cluster with companies like General Motors, Volkswagen, Skoda, Mahindra and Mahindra, Tata Motors, Mercedes Benz, Land Rover, Jaguar Cars, Fiat and Force Motors having assembly plants in the area. Nashik has a major base of Mahindra & Mahindra with a UV assembly unit and an Engine assembly unit. Aurangabad with Audi, Skoda and Volkswagen also forms part of the western cluster. Another emerging cluster is in the state of Gujarat with manufacturing facility of General Motors in Halol and further planned for Tata Nano at their plant in Sanand. Ford, Maruti Suzuki and Peugeot-Citroen plants are also set to come up in Gujarat. Kolkata with Hindustan Motors, Noida with Honda and Bangalore with Toyota are some of the other automotive manufacturing regions around the country. Industry Performance for Last Five Years and Projections for Next Three Years:

Indian SUV Car Segment trend (OCT 2012 to OCT 2013):

October - 2013

August - 2013

INCLUDEPICTURE "http://www.team-bhp.com/forum/iipcache/148856.jpg" \* MERGEFORMATINET An economic slowdown has seen go hand in hand with sustained levels of high inflation. This combination has increased the cost of vehicle ownership in the country.

This scenario can result in the Automotive Mission Plan (AMP) target of growing into a $145-billion industry by 2016 being missed by 20-25% at the current growth rate levels, according to SIAM. SIAM also lowered its sales growth projection for passenger cars to just 1-3% for this fiscal from its earlier forecast of 9-11% growth as slowing economy, low consumer sentiment, high fuel prices and interest rates threaten to prolong the slowdown in the market.Market Share of Organized and Unorganized Sectors:According to the latest available figures, between fiscal FY 2007-12 sales of used cars in India grew at a compounded annual growth rate of 22%, from 1 million units to 2.6 million units that was worth INR 520 billion. That outpaced sales of new cars, which grew from 1.1 million to 2 million in the same period. It has been forecasts that the used-car market will grow at 22-24%, to 7.7m units from FY 20012-17, at which time sales of new cars is projected to be at 4.3 million.There are several reasons for this growth. In purely monetary terms, the used cars offer a car at the average price of around INR 2 lakhs, against an average of INR 4 lakhs for a new car. At the micro economic level conditions such as high excise duties, high interest rates on automobile loans and rising road taxes have made new cars more expensive. At the macro level, as previously stated, factors such as high inflation coupled with economic uncertainty, is prompting more car buyers to postpone a new-car purchase and turn to used cars instead.

Demand is also being fuelled by a steadily rising number of Tier 2, 3 and 4 towns and cities, which house a growing population of upwardly-mobile but budget-conscious customers. At the same time, the supply of used cars has increased in recent years, as customers have begun upgrading to newer cars more frequently than earlier. With the rise of two and even three-car households, cars are better maintained, adding to the supply of good-quality cars.Major Competitors: Market share of Top Five players in the Last Year:

Strength & Weakness Analysis: Segment and Industry WiseRenault:Strengths Offers wide variety of products to choose from including sedan, SUV and hatchbacks.

No engine noise even in diesel smooth gear shifts and pickup. International market presence with stronghold in the European marketoffers wide variety to choose from including sedan, SUV and hatchbacks. Strong brand associations with Nissan, Mahindra etc helped in global reach. Actively involved in global motorsport events as teams and sponsors for promotions.

Weaknesses No 4x4 wheel drive option.

Use of poor plastic and inferior quality.

Despite European popularity, lacks penetration in Asian and growing markets

Cases of recall of cars slightly affected brand image.

Ford:

Strength Offers a wide range of cars to different set of customers. Provides exclusive product features taking into consideration the targeted segments. Sleek design of its car, loaded with features. The EcoSport's interior is in another league, the dash has a modern, angular design, dominated by the V-shaped centre console Fuel efficient engine. Present across continents and has excellent visibility & marketingWeakness

Adversely affected by the global recession & Euro crisis

Hasnt completely tapped emerging economies as compared to some other automobile giants. Tarnished reputation recently when 972 units of Ecosport diesel recalled in India.

Mahindra & Mahindra:Strength:

Mahindra SUVs have a stronghold in the Indian commercial taxi market which have good performance o tough terrains. The company's ability to introduce new products in the market and to generate sales from those new products is a major strength. Mahindra has been one of the strongest brands in the Indian automobile market Excellent branding and advertising, and low after sales service cost Sturdy SUVs good for Indian roads and off-road terrainWeakness:

Mahindras partnership with Renault did not live up to international quality standards through their brand Logan. The company is highly dependent on the rural sector, and the rural sector in turn is highly dependent on the monsoons.

Maruti Suzuki:Strength

There are large no of vehicles in Maruti Product portfolio.

Have good product lines with good fuel efficiency like Maruti Swift, Diesel, and Alto etc.

Products for many segments of market Reliable and cheap.

Good promotionalstrategyis adopted by MUL to transfer its thoughts to the people about its products. Strong Brand Value and Loyal Customer Base are big strengthsfor MUL

Established brand in Indian market.

Great service and nationwide penetration.Weakness

Comparatively new to diesel cars.

Maruti hasnt proved itself in SUV segment like other players.

Low interior quality inside the cars when compared to quality players like Hyundai and other new foreign players like Volkswagen, Nissan etc.

Heavy import tariffs on fully built imported models.

Not diversified.

Lack of experience with foreign market.

Indirect CompetitorsThese competitors may not offer similar product but operate in the same market and have the capability to attract a business customer base by providing them with an alternative. Indirect competitors sell products that are satisfy the same need of the consumers but by a different product offering altogether. These competitors although operate in a different sector, compete for the same customer base.

Indirect competitors for passengers cars would be:

1) Public Transport

2) Two Wheelers

3) Electronics Cars4) Second hand CarsPESTLE Analysis:1) Political: Indian Government has changed its role from controller to facilitator with prime focus on providing better infrastructure, growth oriented economic policies and right environment to attract investments. This has made global auto giant auto enter into India and affect the competitive environment. The liberalization steps, such as, relaxation of the foreign exchange and equity regulations, reduction of tariffs on imports, and refining the banking policies, have played an equally important role in bringing the Indian automotive industry to great heights.

Institutionalization of automobile finance has further paved the way to sustain a long-term high growth for the industry.2) Economical: Rising GDP consecutively for the last 5 years has led to increased Purchasing Power Parity (PPP). Per Capita Income (PCI) has been on the upward which is impacting the segments of automobiles being ventured into.

Increasing urbanization of rural India also has given rise to increase in sales.

The concept of service in auto industry has changed into customer care now, thus en-compassing the greater value into it.

3) Social:The demand of cars has been fueled by following factors: Indian families are becoming increasingly nuclear. Increasing propensity to spend. Increasing distances between workplace and residence. Increase in percentage of working women has increased number of earning members in a family.4) Technological: Alternate Fuel: increasing use of CNG and LPG instead of conventional fuel has made the entry of new kinds of vehicle in the market.

Advent of Internet: The customer can now use the Internet to place the order and expect the manufacturer to fulfill his customized demand in the minimum time.

Electric Car: With technological advancement, rising fuel prices and limited amount of global fuel reserves electrical car may emerge as a preferred option

5) Legal:

Legal provisions relating to safety measures.

Confirms the governments intention on harmonizing the regulatory standards with the rest of the world

Indian government auto policy aimed at promoting an integrated, phased and conductive growth of the Indian automobile industry.

Establish an international hub for manufacturing small, affordable passengercars as well as tractor and two wheelers.

Ensure a balanced transition to open trade at minimal risk to the Indian economy and local industry.6) Environmental: Physical infrastructure such as roads and bridges has a deep bearing on the use ofautomobiles. The presence of the good quality and length of roads is seen a major prerequisite to increase in sales of automobiles. Technological solutions helps in integrating the supply chain, hence reduce losses and increase profitability.

With the entry of global companies into the Indian market, advanced technologies, both in product and production process have developed.

With the development or evolution of alternate fuels, hybrid cars have made entry into the market.

Few global companies have setup R &D centers in India.

Major global players like Audi, BMW, and Hyundai etc. have setup theirmanufacturing units in India.Market AnalysisMarketing Mix 4Ps:Product:

Maruti Suzuki has divided its Product line into five segments as per the following table.

Product LineProducts

A1 (Mini)800

A2 (Compact/Hatch-back)Alto, Zen ,Wagon R, Swift, A-star ,Ritz

A3 (Mid-Size)Esteem , Baleno, Dzire (Esteem & Baleno have phased out)

UTILITY VEHICLEVitara, Gypsy

MULTI PURPOSE VEHICLEOmni, Versa

Price:

Place:

Some numbers to show the extensive network for MSIL are:

Showrooms & Car Sale Outlets 933 covering 668 cities

Authorized service stations 1845 covering 1395 cities

Dealership Outlets 1101

True-Value Outlets 353 covering 208 cities

Express Service Stations on Highways 30Promotion:

TV There have been a lot of advertisements through this media as most of the target audience connects to MSIL through its emotional TV commercials where the company touches everyone irrespective of their Demographics, Age, Occupations, etc. There is always an added advantage when you connect to the audience through audio-visual media as it is supposed to leave an ever-lasting impact on the consumers.

Print Media The Company has also used Newspaper, Magazines to promote its products to the consumers.

Radio The Company also uses radia as an important media for advertising its product line. It sponsors certain shows on air, events for all radio users, etc.

Segmentation:There are different parameters based on which the cars available in the Indian market are categorized. The technically defining parameters are based on the length of the car, engine capacity, features offered, seating capacity and structure of the car etc.We are planning to launch a Maruti Suzuki car in a compact SUVs segment. Geographic: Region:

PAN India

States & Cities: Focus Cities: India has 55 Tier 2 cities, out which 8 are state capitals and 1 is a union territory. The initial focus shall be on these 8 state capitals, their periphery towns and later all the 55 cities. Focus on Tier 1 cities shall be secondary. The eight Tier 2 cities that are state capitals are: Bhopal, Lucknow, Jaipur, Patna, Ranchi, Guwahati, Trivandrum and Bhubaneswar. Demographics: Age: 22-40

Income: 8-15 Lakhs P.A.

Gender: Predominantly Male.Psychographics: Shifting from Middle to High Residential Property Ownership, and hence need an automobile worthy of their societal prestige Want to move from Sedans to a Big Car, yet within a budget. Show a clear bias towards branded products as compared those which are customized. Weekend Adventure Seekers, have an inherent need to escape the city on non working days Initial focus on the shifters rather than the regulars; those who want to move up the scale from hatchbacks or sedans to SUVs Once the initial focus is attained, the regulars from the other competitors shall be targetedBehavioral: Benefit

Comfort & Performance with an element of Luxury

User Status

Regular users; medium to heavy range

Loyalty Status

Hardcore loyal to split loyal- loyal to 1-2 brands Target Group: Working professionals, especially in the corporate world who toil in the weekdays and wish to escape the same on the weekends. Mid Size Joint families with the major income earner possessing an income of 8-15 Lakhs.Positioning:The analysis includes analyzing the category membership and then the points-of-parity and points-of-differentiation.

Analyzing category membership: There is a huge competition in the passenger industry with big players like Tata, Hyundai etc. In India, Maruti is leading the passenger car industry. They should try and compete to sustain its first position by a comfortable margin. Therefore, they should offer more differentiated products like in SUV & MUV segment.

Point-of-parity: Maruti offers various types of cars which are common to all segments such as Alto, Omni, swift etc. These cars cater to general needs of the customers.

Point-of-differentiation: People in India now indulge in more outdoor activities compared to the past. This is the result of growing disposable income. For an average Indian family, a compact SUV makes sense because for its optimal proportions, practicality, usability, fuel economy and cost of ownership.Perceptual Map: Looks Classy and Distinctive

Looks Orthodox and Common

Identification of needs being met: Seating & body style

Fuel efficient

Comfort

Performance terms of speed & low maintenance

Safety

CostPerformance Review

ObjectivesMarutis Performance:

Component2008-092009-102010-112011-122012-13

Total Unit Sales792,16710,18,36512,71,00511,33,69511,71,434

PAT (RS. MN)12,18724,97622,88616,35223,921

Market Share (%)46.544.645.338.339.1

Diesel Vehicle Sales (Unit)---163,000199,000243,000393,000

Rural Sales % of Total Sales---16.520.52528

To manufacture a Compact/Budget SUV that suits both urban youth and traditional midsized joint families and that caters to both Tier1/2 city and off road conditions.

To price the Compact/Budget SUV in middle of its competitors. Hence, the price shall be between INR 6-10 lakhs

To first attain and then surpass the market share of Maruti in the automobile industry in the targeted segment of Compact/Budget SUV. Thus, a market share in excess of