ITM BUSINESS SCHOOL

PGDM

(Batch 2011-13)

BUSINESS POLICY AND SRATEGIC

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

GROUP 3
BATCH - Finance 2
A Project Report
On
Maruti Suzuki Ltd.

TABLE OF CONTENT
SR. NO.

SECTION

PAGE NO.

Executive Summary

Define the Industry

Portfolio Analysis of Industry

Attractiveness of Industry

Value Chain of Maruti Suzuki

Porters generic Strategy

Added Value Concept

Cost Component

10

Willingness to Pay Component

11

10

Overcome the Threats

12

11

Scope of Further Growth of Company

12

12

Conclusion and Learning

13

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

2. DEFINE THE INDUSTRY

Maruti Suzuki India Limited is a subsidiary company of Japanese automaker
Suzuki Motor Corporation. It has a market share of 42.1% of the Indian

passenger car market as of March 2012. Maruti Suzuki offers a complete

range of cars from entry level Maruti 800 and Alto, to
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hatchback Ritz, A-Star, Swift, Wagon-R, Estillo and sedans Dzire, SX4, in
the 'C' segment Maruti Eeco, Multi-Purpose vehicle Ertiga and Sports
Utility vehicle Grand Vitara. It was the first company in India to massproduce and sell more than a million cars. It is largely credited for having
brought in an automobile revolution to India.

INDIAN AUTO INDUSTRY

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

MARUTI SUZUKI GROWTH ANALYSIS

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

MSIL's sales of its mid-sized sedan SX4 plunged by 70.5 percent to just
679 units in the month, the company said in a statement, adding that it
managed to sell just two units of the luxury Kizashi sedan. Exports
during the month stood at 11,210 as compared to 8,796 in July last year,
up 27.4 percent.

CURRENT STRATEGIES OF MSIL

1. Focus on small market segment to beat the stiff competition.
2. Develop capabilities & internal resources to finance its expansion and
growth.
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3. To stay away from ultra-low cost segment.

4. To make India an exclusive small car manufacturing base to leverage
frugal engineering.

5. To establish R&D facility in India to produce cars in India,

starting from design till production

CORE COMPETENCIES OF MSIL:

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

3. PORTFOLIO ANALYSIS OF THE COMPANY

BCG Matrix for MSIL
Maruti Suzuki, one of Indias leading automobile manufacturer and the

market leader in the car segment, both in terms of volume of vehicles

sold and revenue earned.

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

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

GE MATRIX

HIGH

BUSINESS
STRENGTH

MEDIU
M

Investment Investment &

&
growth
growth
SWIFT
ALTO
Investment
&
growth
Selectivity/earnin
SWIFT
gs
DEZIRE
Selectivity/

LOW

earnings
WAGON R

SX4

Harvest
VERSA

4. ATTRACTIVENESS OF THE INDUSTRY

PORTERS FIVE FORCES MODEL

LOW
Selectivity/
earnings ASTAR

Harvest ECO

Harvest
OMNI

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

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1) Threat of New Entrants: Increasing

Although most of the major global players are present in the Indian market; few more are
expected to enter due to the welcoming government policies and expected retaliation.
2) Threat of Substitutes: Low to Medium

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

5. VALUE CHAIN OF MARUTI SUZUKI

Porter distinguishes between primary activities and support activities.

Primary activities are directly concerned with the creation or delivery of a
product or service i.e. operational. Each

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of these primary activities is linked to support activities which help to

improve their effectiveness or efficiency.

(A) Primary activities at Maruti Suzuki (Operational)

1) Inbound Logistics
Inbound Logistics i.e. the receiving and warehousing of raw materials,
and their distribution to manufacturing. Maruti Suzukis inputs primarily
comprise raw materials and purchased components. Raw material
includes rubber, glass, steel, plastic, aluminum. Tyre, windshields, and
airbags are example of parts or components. The company has
implemented tierization of suppliers and Just in Time supply logistics.
2) Operations
Transform inputs into final product form through machining, packaging,
assembly, equipment maintenance, testing, printing and facility
operations.
3) Outbound Logistics
Are the activities required to get the finished product to the customer,
including collecting, storing, physically distributing, material handling,
delivery vehicle operation, order processing and scheduling.
4) Marketing and Sales
Provide means by which buyers can purchase the product and inducing
them to do so, such as advertising, promotion, sales force, quoting,
channel selection, channel relations, and pricing. Marutis marketing
objective is to continually offer the customer new products and services
that:
1. Reduce the customers cost of ownership of our cars; and

2. Anticipate and address the customers needs and preferences in all

aspects and stages of car ownership (MARUTI SUZUKI refers to this
as the 360 degree customer experience
5) Service
Aims to enhance or maintain the value of the product, such as
installation, repair, training, parts supply, and product adjustment

(B)Secondary activities at Maruti Suzuki (Supportive)

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

6. PORTERS GENERIC STRATEGY

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

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

7. ADDED VALUE CONCEPT

The Quality Advantage
Maruti Suzuki Owners Experience Fewer Problems With Their Vehicles
Than Any Other Car Manufacturer In India. The Alto Was Chosen No.1 In
The premium Compact Car Segment across 9 Parameters. Wagon R No. 1
in the premium compact car Segment and SWIFT as best hatch back car.
This study measures owner In terms of design, content, layout and
performance of vehicles across various parameters.
A Buying Experience like No Other
Maruti Suzuki Has a sales network Of 307 state-of-the-art showrooms
across 189 Cities, with a workforce of Over 6000 trained sales personnel
to guide Customers in finding the right Car. The high sales and customer
care standards led us to achieve the no.1 name.
Quality Service across 1036 Cities
Maruti Suzuki scored the highest across all 7 parameters: least problems
experienced with vehicle serviced, highest service quality, best in-service
experience, best service delivery, best service advisor experience, most
user-friendly service and best service initiation experience. About 92% of
Maruti Suzuki owners feel that work gets done right the first time during
service and 97% of Maruti Suzuki owners would probably recommend the
same make of vehicle, while 90% owners would probably repurchase the
same make of vehicle.

One Stop Shop

At Maruti Suzuki, you will find your entire car related needs met under
one roof. Whether it is easy finance, insurance, fleet management
services, exchange- Maruti Suzuki is set to provide a single-window
solution for all your car related needs.

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8. COST COMPONENTS
The cost components are basically the group of cost origins for the
organization. Cost Components of any Automobile Company like Maruti
Suzuki include Prime Cost, Works Cost, and Cost of production and Total
Cost.
Prime Cost
It consists of costs of direct material, direct labour and direct expense
specifically attributable to the job. This is also known as flat, direct or
basic cost. Costs involved in this are the main costs with the help of
which the core products that the company is indulged in are produced.
Egg.:- costs in procuring raw materials for production of the cars,
payment to labour involved in production activities etc.
Works Cost
It comprises of prime cost and factory overheads, (cost of indirect material,
indirect labour and indirect expenses related to factory works). This cost is
also known as factory cost, production or manufacturing cost. Costs
involved in this are Complementary to the Prime costs of the business and
includes those things which directly doesnt involve in production of the
goods. Egg.:- Payment of wages to employees such as supervisors, guards
etc.

Cost of Production
It is the sum total of works cost and office and administrative overheads
(Cost of indirect material, indirect labour and indirect expenses related
to office works). This cost is known as office cost. Costs involved in this
are the Office and Administrative Expenses i.e. the salaries of the office
employees and managers.
Improvement in Cost Component
Prime Cost component is the one which can be improved and is the one
on which the company is taking steps to improve because of the foreign
exchange fluctuations and higher input costs. The company has initiated
measures to step up localization levels and to pare the number of tier-I
suppliers over the next two-three years, cutting down component
imports, improving yield and enhancing the usage of raw materials.
Consolidating its supplier base to increase sourcing from a smaller and
more stable base of tier-I vendors to bring down logistics costs and to
leverage economies of scale while inking sourcing pacts.
Maruti Suzuki sources 10 per cent of components directly from foreign
markets, while another 15 per cent are imported by its vendors. To
reduce exposure to forex fluctuations, the company has decided to cut

direct and indirect imports of components by half over the next three
years.
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9. WILLINGNESS TO PAY
Customers prefer and give value to the convenience provided by one
stop shopping as it gives broad scope. It gives the customer the
experience of one single point of contact for sales service and other
support which they can provide. Maruti Suzuki is providing the same with
so many features mentioned below:

Offering one shop stop:

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

10. THREATS OF SUBSTITUTION

Imitation It refers to struggle for existence. Use of high grade plastics in

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

11. SCOPE OF FUTURE GROWTH OF MARUTI

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

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12. CONCLUSION AND LEARNING

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

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