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Case Stu~v - 12

Maruti Udyog Ltd.

Introduction

Maruti Udyog Ltd. was established as a government company in Feb-

ruary 1981 with the following objectives:

:l Mcdernlaauon of Indian Automobile industry.

o Production of fuel efflcfen] vehicles to conserve scarce resources. J Producnon uf large number of motor vehicles which was neces-

sary for economic growth

A Licence end a Joint Venture agreement was signed with Suzuki Motors company of Japan, in Oct., 1982, by which Suzuki acquired 26% share of the equity, with an opinion to increase it to 40%, Suzuki Motors Corporation further increased equity to 50% in the year 1992, convertIng Maruti Udyog Ltd. into a non-government company. Marutl's total equity is Rs. 1322.92 million.

The r .is~.j'_"1 of the company is as under.

COMPANY MISSION

"To provide a Wide renqe of modern, high quality fuel efftctcr-r vehicles in order to meet the need of different customers. both in domestic and export market"

Competitors

Before Meruu came into existence, the indian automobile industry was. characterized t-y technological and very slow volume growth.

The entry of Maruti changed the industry scenario completely. Maruti introduced inte-national class products in quick succession, and increased production and sales at a very fast pace. This growth In market size, couple with tl-« introduction of new technology, enabled Maruti to revohnlnlze the Auto components industry. For the first time, the Indian automobile industry could boast international standards of products and processes. Customers could buy a car built to international standards at a reasonable price

Cases in Sales and Distribution Management

wC\5 evident in the company's success in the export market. Till date. we have exported over 100,000 cars to various countries including F.r~nce, Germany, Italy and the UK among others

Given below is a brief overview of the competition-both existing and lrnminent. We have only included those companies. which appear to be serious about setting up a car project.

Competitors

Manujacfljrer Foreign Porlner Mod,~S) Introduction
OeM Deewcc Deewoo Cielo Jul:95
oeM Daewoo Deewoc Tico 1998
Hindustan Molors General Motors Opel Astra Jun.:96
Hindustan Motors Mitshubishi Lancer 1997
PAL Peugool Peugeot 309 Sep:95
PAL FIAT Uno April 1996
M&M Ford Escort September'De
M&M Ford Fiesta 1998
Sipanl Rover Montego April'94
Srlrarn (SlEW Honda Civic 1997
TELCO Mercedes Benz Mercedes E220 M.y'1996
TELCO Mercedes Benz Mercedes £2500 May'1996
TELCO None Tata India 1997
Hyundal None Elentre/Accent 1998
Hero Motors BMW BMW 3811 AP!i'd~arru::l
Eicher Volkswaqen Skoda Felicia Discussion on MARKE: SHARES IN THE AUTO INDUSTRY

37

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Cases i" Sales and Distribution Management

SALES

Domestic

To meet the demand of our customers and to provide them with excellent after Sales Service, we have developed an extensive marketing and after sales service network comprising 123 dealers. 161 sales outlets (covering 93 :ities), 194 dealer workshops and 868 Marutl authorized Service Station besides 204 spare parts outlets including 15 MGP shcppe (boutiquf>..s) and 26 stockists (covering 421 cities) 10 India, (as on 31.10.97),

Exports

Maruf has exported over 1.6 lac vehicles to more than countries (till Oct. 1997). 75% of these vehicles have been sent to Europe

Maruti's e- port markets are:
AFRICA NIGERIA ASIA
Lebanon Reunion Bhuten
Algena Kwanda Israel
Angola Seneqel Jordan
Cameroun Tanzania Bangl~desh
Centrelnoua Uganda Nepal
Congo Gabon Sri Lanka
Malwai Ivory Coast Sudan
Zambia Kenya Syria
Djibouti Mozambique Turkey
Egypt Zimbabwe Yemen
Mauriliu:-
Ethiopia
Madagascar Top importers
LATlN AMERICA EUROPE Poland
Argentina Slovenia Italy
Uruguay Netherlands Switzerland
Certrbeen Island Siovakte Latvia
Malia Belgium Crcetta
Chile Germany Balvia
EI Salvador Macedonia
Poland Norway OCEANIA
French Poly Spain Australia
Rorneo'a France New Zealand
Nicaragua Portugal South Pectlic
Panllma Austria Island
Peru Greece
Paraguay Cyprus
Czechoslovakia
Denmark
Hungary Cases In Soles and Dfstrlbuffon Manoaement

Iceland

U.K.

Lativa Netherlands Romania

MUL DOMESTIC SALES

·350000 ,---------------~--.

~t_------------~H

85- 86- 87- ee- 89- 90- 91- 92- 93- 94- 95- 96- M ~ M ~ 00 91 ~ ~ ~ ~ 00 ~ Yeas

MUL EXPORT

.0000
35000
" JOOOO
~ 25000
"5
!I 20000
15000
10000
·5000
"



II!
.. ,- - f--
- . . I &&.87 n-88 88-89 89-90 90-91 91·92 92-93 93-9-i 9-4·95 95-9 Years

Strategies Used by Maruti: From the introduction it is clear that Maruti has been increasing its market share continuously. The main reasons behind thls progress does Marutl use real understanding of consumers' need and strong strategies. Maruti has been using following strategies:

New Product Development Strategy: Meruti has been using the new product development strategy since 1984, when they launched Omnl after M-800. In April 1986. Marut! launched new modal of Mal\lli~800.

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Cases in Soles and Distribution Management

Manlti lOlt{I~Ocl 11)93). followed by Marutt 800 model with some modiItcanon of th.' latter After M·I000 they launched MaRiti Zen in Oct. 1993.

Its positive features are new fada and interior trim, easy-to-read instrumentation, superbly finished switchgear, fine driving position and well-supported seats. Its chunky, polyurethane, three-spokes steering wheel offers meatier grip than Maruti 800 or 1000 does. The widescreen falls forward of the facta. clI!ating a roomy impression. The headroom is upped; allowing for a 111l)1..:!. upri~lht-silling stance and its rear is roomier than the 800's,

Zen has atop speed of 150 km per hour with five gears and engine fitted with a one-litre, four-cylinder motor.

It provide .. :. <'J mere confidence and mature ride, potholes and deep manholes bemq absorbed by II comfortably. Among Indian cars. Zen has the mos' en- 1,J<'Lbl" handling.

Its most interesting technical highlight is its engine. It is lighter than the smaller engin€ 01 the M.arull 800 due to Its aluminium block, which also boasts of thrE!€ tunes better thermal conductivity than cast iron. This improves heat transfer. which is Important for performance, efficiency and emission. Zen "Iso features electronic ignition. which affords consistent performanc(>, hence lower erntssion. Besides, there should be fewer main' tenance P'(.~·'!l'rn". as them are no contact breather points.

After 7..('n MUllaunched three versions of Esteem lX. VX & AX in Nov '94 Nov '95 and June '96 respectively.

One 01 rhe most striking characteristics of the Esteem series is the carelully J<!xl(3Iled interior. There is a particular emphasis on features, which add i~! Jriving ease. A cowie box for Knickknacks. Magazine pockets for the front seats. Climate control provided by a highly efficient AC. And for the winter chill. a cabin heater. The Esteem AX. with state·of-the-heart Japanese Automatic Transmission gives you incompa~able ease of driving. NQ clutch. No constant changing of gears. Just start and roll. The Esteem AX and VX ere equipped with powder steering. which enables effortless

handling 01 the wheel.

After Esteem (LX. VX. AX). Maruti launched Zen automatic;; (Oct"96), Gypsy King (Nov.'96), Omn; (E) (Dec:96), New Maruti 800 (501'1:96). the 1998 Esteem (Oct.'97), Zen VX(July'98). Zen-

D (Aug:98)

The i\in\ 01 U$1!1g this str~legy' is strengthening Manni's competitive:

position.

low pricing Strategy: Meruti Udyog has been in monopoly in Indian

Car market it has 1afne market share. the market is highly aware of Maruti cars. the market LS pnce sensitive, and there is some potential competition. ManIt; has adopted thrs str<\legy that low price will encourage rapid product

Cases in Sales and Distribution Management 41 acce~tance. C~rr:pany also believes that market demand is htchly sensitive to pnce but m!OImally sensitive to promotion. This strategy makes sense when market IS large. Marutt has large market share and its low price strategy sui~s to Indian customers. In India, still most of the customers ~Ion~ to middle class and they are unable to purchase cars with high price r.e. Clelo. Tete Safari, etc.

Product Positioning Strategy: Positioning is not so much what the product .actually is, but rather how a company wants its target consumers ~o perc~lve the product. The position occupied by MARUTI is that of trust, Innovation. and world class. ,?chnology. This stems from the number of cars that.MaNti has put on India s roads. 'he continuous upqradation of Marutt'a services. and ~~oducts, and its success in the international market. To reinforce this poSlt,lon Maruti uses the line "BUILDING TRUST WORLDWIDE" With company s logo In all its communication.

M~ruti currently has six models in the market. Each of these IS temetcd at

a particular consumer segment, and is positioned accordingly •

de!:>C;i~d ~1~~~7 occupied by eech model and targeted customers are

Maruti-800: Reliable, economical and easy-to-drive small car

The. Maruti 8?O is not just India's largest selling, fuel efficient "a'nd economical car. With technology well adapted to suit Indi,,\"11'conBitions it's f:eedom on wheels to millions of people in India. So, drive out to desttnatton of your dream

~arget~d Customers: Customers who are buying their first purchase. working ladier from upper class and middle class families.

. re Product by-line: Freedom within your roech

Omni: Spacious car for multi-purpose use.

All the space you ever needed. Found in the Maruti Ornr» Fill Itwith family, friends. and laughter ...

And rejoice in the freedom of your own space.

Targe~ed. C.lIst.omers: Ornni has been presented fI~ a f<::'lllily car and more empnasrs IS given on SPACE it provides lor the fomll\l Customers tarqeted for Omni are Middle and Upper Middle class fom'IIl'!~. traders. taxi-operators and hospitals using is. as an ambulance

The product by-line: Travel in space.

Gypsy: ,Rugged all terrain vehicles.

Explore new territory. Tread new paths. Discover new frontiers. In the legendary. lour wheels drive marque. With superb mi1oo('uvnabiJity. smooth handling and raw energy. Pecked into a sleek, vet ruoo -d frame Making Gypsy the ideal vehicle for the pursuit or "d~(>l+1ur~; Whether

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Coses in &!es and Dist.ribution Management

ploughing th"v~.jh dirt tracks. or crutstnq the city street. The real emotion behind the word Gyps)' is that it keeps on travelling, as do Gypsies. It never stops It can .ccumulate itself with any type of environment.

Targeted customers: Targeted customers are young, adventurous men of India. Army. Police force and hospitals.

The product by-line: This is a Gypsy in everyone. MaroU-IOOO : Luxurious family car at a sensible price.

Luxury and economy. Never before have the two come together so stylishly. In one body. That of the Maruti 1000. Because value is important on the joumey of life.

Targeted Customers : Targeted customers are professionals, business class families, Upper class women doing business or service.

The product by·line : Think big. You can afford it.

Zen : Intem"-'tional class car for driving pleasure.

When your life is a celebration, your car has got to ~ a Manni Suzuki Zen. Experience the exhilaration of India's raciest car. And rediscover the

joy of driving.

Targeted Customers: Zen has been positioned as world car not only in India but abroad also. Targeted customers are people working in corporate and big companies. Psychologically it fulfils their need of recognition, as It is an International car. As Zen gives you adult experience, targeted customers arc wen-experienced personalities in their areas. These customers generally belong to age group of 35 to 45 years. Zen also targets international customers from ~'pther\~nds, Germany, Italy, Belgium, Greece and 50 on Mal" :~i gives more emphasis on the export of Zen I", other countries because it has wider market in foreign countries.

The product by-line: Zen the adult experience.

Esteem: lr.t.ernationatly popular, upmarket luxury car of contemporary design.

Smooth. the wey your life is. Powerful. the way you are. International,

the way your dealings are. The Esteem. It's designed with your mind. It has been positioned as Luxury on Indian roads. Luxury that is affordable.

Targetr.d Customers: Targeted customers are business class people, UT.per-uppcr II1iddle dl)sS customers and professionals working in multinatiOl,als ilnd big companies.

The product by-line: (a) Ior Esteem AX, VX & LX Much more than Luxury

tb) For Esteem 1998 Move ahead in Luxury

Network Extensions Stra tc!~l'J : Maruti has a large n(>tv..'ork of dealerShip

Cases in Sales and Distribution Monagemenl 43

and ~ sta~ons. As. meny comoentors are entering the Indian Alita rrerket .. ,., .. _ ...... Maruti has decided to Increase its network as much as pOSSible. So that more

end more customers would be able to reach to purchase points. Through la

network of shcwroorn Maruti is aiming to beat its cornpetltors rge

. Av~i1a.~ility Strategy: Maruti has adopted this strategy for enhenc-

Ing evailablltty of spare parts anywhere is India. The spare part divisions

operate th.rough the network of dealers, as well as through Maruti genuine

part st~klst and ~GP retail shops. The SPD, through various well-time stra~egles, has achieved a sales turnover of Rs. 277 crores in 1997-98 as

'3g4"9n4st Rs. 83 crores in 1993-94. at a cumulative annual growth rate of

. per cent.

~oodi~g Metro Cities Strategy : As many new competitors are entenn~ ~ndla~ euto market, Maruti has adopted a new strategy of flooding ~etro Clh~ WIth Maruti cars. Foreign companies first target Metro cities to a~c.h their pro?uct. Thus it becomes very essential for rnarutl to make its position strong In these cities.

' .. Product Sales Promotion Strategy: Maruti uses following promo· honal tools to promote the sales of its Car ;

a Point of Purchase iniormation : Maruti has tied up with Citi Bank to promote its sales through providing finance at easy terms.

Q Free Gift: Recently Marutl has started free gift scheme for Marutl Esteem. It gave free Polaroid Camera with purcheseuof Manni Esteem. This offer was valid till 30'" August,1998. Free gift scheme has also been started for Zen-D.

o New fO.r Old : Recently Manni has started this scheme first in Chcnne! that drive in your old car (any model) and drive out with a new Marun (any model). Cholamandelern Investment & Finance Company Ltd., Chennet.

o Sponsored this Scheme : You could enjoy this opportunity in rnela organised by this company on 12~\ & l S" September. 1998 In Chennel. Maruti is planning to organise such event in different parts of India. Some other schemes for Zen-D are free test drive Immediate delivery of Zen-D. exciting free gifts. '

Different dealers follow different promotional strategies.

fLUSt:. StlO NEXT PPr6:£.

folt &01"51\00-15 FOf<. DISCUSSION.

CONT'D

MARUTI UDYOG LIMITED: QUESTIONS FOR DISCUSSION:

Please give your brief Analysis of the Case and Answer the following Questions. Please justify your Answers.

1) Do a detailed SWOT Analysis of Maruti Udyog Limited.

2) Critically Analyse the New Product Development Strategy of Mar uti Udyog.

3) Critically Analyze the Product Positioning Strategy of Maruti Udyog.

4) Critically Analyze the Product Sales Promotion Strategy ofM.ruti Udyog.

5) Wbo are the Major Players in the Automobile Industry in India Today and what are their Current Market Shares Today? (Infermation to be collected from the Internet or any other source).

6) What should be Maruti's Strategy to retain its Leadership Position in the Automobile Industry in India now and in future?

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