This action might not be possible to undo. Are you sure you want to continue?
Presenters: Shalinee Mattoo Anirban Baidya Dhiraj Shetty Nilesh Pathak
Submitted to Prof. Prashant Salwan Professor of International Business Indian Institute of Management, Indore
20th May 2010
Table of Contents
STRATEGY OF INTERNATIONAL BUSINESS GLOBAL INTEGRATION WITH LOCAL RESPONSES ................................................................................................................. 2 1 BRIEF HISTORY OF MARUTI-SUZUKI INDIA LTD ............................................................ 2 2 PORTER¶S FIVE FORCES MODEL................................................................................. 3 3 VALUE CHAIN OF MARUTI SUZUKI ............................................................................... 8 3.1 PRIMARY ACTIVITIES AT MARUTI SUZUKI ARE: .................................................................9 3.1.1 INBOUND LOGISTICS .............................................................................................9 3.1.2 OPERATIONS .................................................................................................... 10 3.1.3 OUTBOUND LOGISTICS........................................................................................ 12 3.1.4 MARKETING AND SALES ....................................................................................... 12 3.1.5 SERVICE .......................................................................................................... 13 3.2 SECONDARY ACTIVITIES AT MARUTI SUZUKI ARE:........................................................... 15 3.2.1 PROCUREMENT ................................................................................................. 15 3.2.2 TECHNOLOGY DEVELOPMENT............................................................................... 15 3.2.3 HUMAN RESOURCE MANAGEMENT ......................................................................... 17 3.2.4 FIRM INFRASTRUCTURE ....................................................................................... 17 3.3 INTERNATIONALIZATION OF VALUE CHAIN ................................................................... 18 4 GLOBAL INTEGRATION VS LOCAL RESPONSES ........................................................... 19
STRATEGY OF INTERNATIONAL BUSINESS GLOBA L INTEGRA TION WITH LOCAL RESPONSES 1 Brief History of Maruti-Suzuki India Ltd Maruti Suzuki India Ltd. 2. scooters or two-wheelers had a long waiting as industrial production was low in numbers. conflict between the JV partners and the company¶s first labor unrest. 3. At the end of this period Suzuki. During this era. This phase is marked by emerging international competition following comprehensive reforms and liberalization. Suzuki had to face several challenges to retain the No. The company has written 28 years old history in the rich Indian heritage.. after a long battle for control. formerly known as Maruti Udyog. The second phase commences with Suzuki¶s involvement in Maruti in 1982 and last until 1992 when Maruti-Suzuki ceases to be a Government of Indian company. The first phase to be identified starts with the foundation of Maruti by Sanjay Gandhi in 1976. The phase comes to a close with the company¶s failure and its conversion by an Act of the Indian parliament into a Public Limited Company in the 1981. In this phase the company¶s governance compromise is for the first time seriously challenged. Hindustan Ambassador and PAL. Later. There are four phases of Maruti-Suzuki¶s growth in India: 1. The forth and current phase lasts from the takeover by Suzuki in 2002 until the present day. Under the several external conditions the company could sustain its No. Maruti Udyog¶s inception came in the country in 1981 under the provisions of the Indian Companies Act. 2 . Maruti Suzuki made a successful move with its ever running Maruti 800 in 1983. Maruti-Suzuki was shielded from international competition and able to outperform domestic competition. In this phase Maruti-Suzuki could grow and acquired market dominance. subsidiary of Suzuki Motor Corporation. In the face of losing ground to competition and changing ownership Maruti-Suzuki adopts a stronger market orientation.1 position. finally acquires the majority in the JV. is the one of the oldest car manufacturers in India. Indian manufacturing and car industry saw a new dawn. Patronized by the Indian Government and supported by Suzuki.1 position. The third phase commences in 1992 and ends in 2001. 4. 1956. With the launch of Maruti 800. There were only two car models in the name of Indian car industry. We will be evaluating these external factors and the strategy and the measures taken by Maruti-Suzuki management to encounter these external factors through Five Forces Model. With the exponential growth of Indian Automotive industry.
and competitive advantage Competitive pressures stemming from buyer bargaining power and supplier-seller collaboration Buyers Competitive pressure coming from the threat of new entry of new rivals Potential New Entrants 3 . Competitive pressures created by jockeying for better market position. and market shape. increased sales.2 Porter·s Five Forces Model Firms in other in other industries offering substitute products Competitive pressure coming from the attempts of the companies outside the industry to win buyers over to their products Suppliers of Raw Materials. Components or other resource inputs Competitive pressures stemming from buyer-supplier bargaining and supplier-seller collaboration Rivalry among competitive Sellers.
buyers has an options like TATA Indica. P.´ ± Annual Report 2007-08. Maruti-Suzuki was at major risk of losing the customers based on buying options and the financing 4 . 1. rising costs of the raw materials.2. while expecting performance and fuel efficiency. in B segment (or A2). Maruti-Suzuki started taking concrete steps to retain the No. Though M800 was only option around Rs. Indian buyers started realizing the buying power they were getting in A & B segments. It has posted severe threat to Maruti Suzuki as A and B segment has been the bread and butter models. With the increased options and players. Maruti-Suzuki started losing market shares (Annual Report 2004-05. average GDP growth of 7%. growth of the TATA Motors. Hyundai. GM and Ford started entering 4-wheeler industry in big way in different market segments.After taking major stake of 54% and eventually rights to management for Maruti-Suzuki in 2002. Also. Rivalry among Competitive Sellers: With liberalization. Suzuki Motor Corporation had several challenges. offering popularly known as B segment. recent labor unrest and instability of management during 1999-2001. some of the offerings were in Diesel and with most of the time. As the competition grew.1 position. Fiat Palio. like their parents did before them. Chevrolet Spark. Hyundai.25). but mainly focusing on middle class. Getz. During the phase of 1995-2000. With these challenges. Tata Motors. there are clear trends that customer expectations from a car have evolved considerably. the buying power of middle class group in India made the Indian automotive market very lucrative. coupled with lucrative financing schemes. Buyers: ³In recent years. Hyundai Santro. international quality and latest features that enhance their safety and convenience. Thos steps are studied are taken referring Five Forces Model as above. Another major worry was the sustenance of market in forthcoming years as the market was growing with Diesel cars and Maruti-Suzuki did not have any successful car in their stable with diesel engine offerings. Car customers now seek contemporary styling.25 Lakhs in A segment. 2. rise of two wheeler industry to name a few.
Maruti-Suzuki (2000-2007. Development of the employees to take on global competition was the major challenge for Maruti-Suzuki 5. is bold. as another resource input the employees has been strength for Maruti-Suzuki. The new design philosophy at Suzuki Motor Corporation. MUL's executive director (marketing).1 position through capturing new buying group in the market. The model was launched when 2 wheeler industries in India was not growing and not offering the cost and fuel efficient solutions to Indian customers. a disciplined approach to cost that enables more features at less price. Also. Components or other resource inputs: Being the No. So far. offering the major threats to current players including Maruti-Suzuki. the quality of the product has been the major challenge as Maruti-Suzuki¶s products were far from achieving the global mark. Potential New Entrants: Not only the growth in Indian automotive industry but the stagnancy in US and European markets started driving major players in USA and Europe to enter India. such as SX4. with major threat to Maruti¶s bread & butter model M800 4. the Company's new models have consistently offered more features than comparable competitor offerings. In addition. MD. aggressive and distinctly European. This has been made possible by a disciplined target cost approach towards new´ ± Annual Report (2007-08).options. petrol engines has been Maruti¶s the major strength. With liberalization." admits Khattar. Maruti's component defect rate was as high as 30. once in his interview. witnessed first in the Swift. giving customers with various options and more buying power. Maruti-Suzuki had major challenge to retain the current customer base as well maintain its No. Maruti-Suzuki had developed suppliers from scratch.1 player in Indian market. Grand Vitara. "The quality of Maruti car is not up to the international standards. Fiat had started building their facilities in 2005-06. Jagdish Khattar. earlier mentioned. told The Financial Express that Maruti sourced 75 per cent of its component requirement from vendors. to the new product design philosophy emerging from Suzuki Motor Corporation. Also. This philosophy is reflected in the Group's other World Strategic Models. as alternative fuel options. A-Star and Splash. broadly. The success of the Company's new models is an indication that this new design philosophy has been well accepted by Indian customers. Players like Volkswagen. grab the major pie in growing Indian automotive industry. 2-wheeler industry outgrown and started offering very fuel-efficient solutions. and are very competitively priced. CNG solutions in their cars. It became major threat to M800 as customers had choice to multiple options of 2-wheeler. New product introductions: ³The Company's success in the market can be attributed. Suppliers of Raw Materials. the current players had started expanding their product portfolios. Also. Maruti-Suzuki had major challenge to retain its existing customers and as well. With the rise of global automotive players in India. and market initiatives. Firms in other industries offering substitute products: M800 has been the greatest strength of MarutiSuzuki. 5 . 3. some of the players started offering LPG. With competitors offering Diesel engines.000 parts per million (PPM) as compared to 200 (PPM) for the developed countries. TATA Motors was coming up TATA Nano. Maruti-Suzuki¶s response: 1. Another aspect in substitute products. which were very efficient and safe.
Maruti Suzuki launched Maruti Finance in January 2002. 2008 Launch of 5th World Strategic model. All other variants upgraded: Alto Spin LXi.5% from the market rates. Following are the services: a. New Esteem variant with minor alterations but at a lower price. Esteem Diesel. This caused a serious threat and loss of revenue to Maruti Suzuki. Maruti True Value: According to a report by research firm Credit Analysis and Research Ltd. A-star Launch of RitZ. The models were focused on urban and semi-urban requirements Following sequence of the introduction of new models clearly anecdotes the new product introduction strategy of Maruti-Suzuki. Maruti-Suzuki tapped this market long-time in 2001. new variant of Versa (5 seater). stereo systems. 2002 to till date. introduction of the Swift Petrol Zen Estilo. new variant of Baleno LXi New version of Maruti 800. SX4 luxury sedan. Redesigned Zen.25% to 0. Maruti Genuine Accessories: Many of the auto component companies other than Maruti Suzuki started to offer components and accessories that were compatible. Swift D¶zire Launched Swift Diesel. Recently. Maruti claims that its finance program offers most competitive interest rates to its customers.550 new cars through exchange or trade in. the Company signed agreements with six public sector banks. Special edition of Maruti 800. Upgraded WagonR Non-A/C Alto variant. b. seat covers and other car care products. with electronic power steering. body cover. the ³TrueValue´ helped to generate a sale of 104. Grand Vitara Launched. Launch New WagonR 2003 2004 2005 2006 2007 2009 2010 2. 360 degree customer service: Maruti-Suzuki entered in various services related to automotive industry to provide customers end-to-end solutions. door visors. fog lamps. LPG variant of the Omni. Year 2002 Models introduced WagonR Pride. which are lower by 0. to help improve retail finance availability. These products are sold through dealer outlets and authorized service 6 . Maruti Suzuki started a new initiative under the brand name Maruti Genuine Accessories to offer accessories like alloy wheels. Maruti-Suzuki took aggressive steps in introducing the new products in India. In 2008-09.5 million units in FY09 growing at compound annual growth rate of 20%. India¶s first colourcoordinated car New Suzuki Grand Vitra XL-7. the overall pre-owned car market in India was 1. Maruti Finance: To promote its bottom line growth. c. it is No. carpets.1 in pre-owned cars with more than 300 dealers in True Value.Between. Currently.
Also. Vendors located within a radius of 100 kilometers from the facilities supply the majority of the components. they had strategic equity interests through joint venture agreements in their vendors. The total parts and accessories sales grew to 13% in 200809 to Rs 10. the Company has set up two institutes of driving training in partnership with the Delhi Government. Recently. a concept refer to as localization.858 Million d. Marui-Suzuki took some of the initiatives like ³Service at your Door Step through Maruti Mobile Support´. 7 . To support small and medium enterprises Maruti-Suzuki initiated a µcluster approach¶. Maruti Driving School: Having started from Bangalore in March 2005. 0neighbourhooddrivingtrainingschoolshavebeensetupin partnership with dealers in various cities across the country. This has enabled MUL to increase the proportion of locally sourced. Maruti Driving School has now spread its network throughout the country. The parts and accessories business served as a good cushion to both revenues and profits. Supplier Partner collaboration: Maruti-Suzuki started pushing its suppliers to acquire ISO certifications. The production systems of their vendors are generally aligned to their needs for a reliable and timely supply of components that meet the required quality standards. who together supply a substantial portion of the purchases of components. MUL has reduced the number of vendors of components in India from 370 as of March 31.stations throughout India. As of the same date. 2000 to about 100 as in 2005. Setting up "Express Service Bays" & "2 . 3. The approach groups vendors together. 2003). A number of their vendors are their dedicated suppliers in that they account for a majority of their turnover. trains them in quality management and assists them in obtaining the ISO 9000 certification (Red Herring Prospectus. which helped the company in big way to get closer to customer and boost the customer confidence in Maruti-Suzuki products.Technician Bays". lower cost components in their models. Car pick-up and drop facility for Women customers.
A company is profitable if the value it commands exceeds the costs involved in creating the product.3 Value Chain of Maruti Suzuki The term value chain was coined by Michael Porter. 8 . Porter distinguishes between primary activities and support activities. In competitive terms. Primary activities are directly concerned with the creation or delivery of a product or service. value is the amount buyers are willing to pay for what a firm provides them. Each of these primary activities is linked to support activities which help to improve their effectiveness or efficiency. The value chain is a comprehensive set of activities that are required to bring a product from a concept stage to marketing and consumption of end products.
offering subsidized. sales tax concessions. plastic. windshields.1 Inbound Logistics Inbound Logistics i. high in-transit inventories (related to long distance transport) and ultimately its total inventory levels. founds supplier JVs with local suppliers and ask Japanese suppliers to do the same. and in forcing some of them to adopt just-in-time (JIT) principles. Gurgaon. a practice that aids in maintaining less than two hours inventory of components within the company. this program calls for weight reduction of one gram for 9 .' (Futaba) for manufacture of Exhaust Systems Components (ESCs). The manufacturing facilities of these Joint Ventures are located at 'Maruti Suzuki Suppliers Park' in IMT Manesar. price. Maruti-Suzuki creates incentives for far away suppliers to move near its plant. Haryana. Futaba is the largest manufacturer of ESCs in Japan and has operations in many countries. Maruti Suzuki formed a joint venture with 'Futaba Industrial Co.1.e. steel. This joint venture will ensure supply of high quality ESCs to the Company. For instance. well located and industrially developed land. transport related uncertainties. Maruti Suzuki has embarked on a comprehensive supplier development program. The JIT system has evolved over the last 25 years in the company from monthly scheduling to daily scheduling of parts order and finally. The key initiative was a raw material yield improvement program with a micro focus on each component on the lines of Suzuki philosophy. These incentives comprise: setting up a supplier park with excellent onsite infrastructure. Tyres.e. Called ³One Component One Gram´. Over 76% of the company¶s 246 suppliers are located within 100 kms of radius. Raw material includes rubber. A Joint Venture Company was incorporated under the name and style of 'FMI Automotive Components Limited¶ with equity participation from Futaba and the Company in the ratio of 51% and 49% respectively. Maruti-Suzuki gets involved in establishing suppliers. This has facilitated cost reduction in supply chain. Maruti Suzuki played a particularly significant role in pushing local component suppliers to improve quality. glass. in 2003. to e-nagare system i. The company has instituted sustainable practices in it¶s relationship with vendors like communicating realistic volumes to avoid excess capacities and inventories and making quick payments to facilitate healthy cash flows and financial discipline. Major Maruti vendors are: Asahi India Glass J. aluminium. which strongly draws on Suzuki¶s home practices. Ltd. Maruti Suzuki¶s inputs primarily comprise raw materials and purchased components. and their distribution to manufacturing. The company has implemented tierization of suppliers and Just In Time supply logistics. the receiving and warehousing of raw materials. and airbags are example of parts or components.3.J Impex (Delhi) Bharat Seats Caparo Maruti Climate Systems India Machino Plastics Denso India Jay Bharat Maruti Krishna Maruti Mark Auto Industries Mark Exhaust Systems The Company worked hard along with its vendors on cost reduction initiatives. generating employment opportunities and promoted development of the local industry. To reduce supply bottle necks.. and delivery. the release of schedules on hourly systems. and reliable power supply generated by Maruti-Suzuki itself.1 Prim ary activ ities at Maruti Suzuki are: 3.
10 . assembly. The operations comprise four car plants across two locations.2 Operatio ns Transform inputs into final product form through machining. partly due to external factors but largely due to cost reduction efforts. the raw material yield improvement savings increased by a factor of three in 2009 as compared to 2008.1. The Company reached a capacity of one million cars annual production in 2008 and was also able to operate at this average rate in the month of March. Production process at Maruti Suzuki: Maruti Suzuki¶s manufacturing facility consists of fully integrated plants with flexible assembly lines located at Gurgaon.every component. twelve models with more than two hundred variants. 3. two engine plants (including a diesel engine joint venture). testing. The scale and complexity of the Company's manufacturing operations have now moved to a different league. The material cost to net sales reduced from 90% in 2000-01 to 79% in 2008-09. 2009. equipment maintenance. With this micro focus. packaging. printing and facility operations.
Maruti Suzuki has implemented Production Management System. Cost Every employee working on the line is 'cost sensitive' and functions in capacity of a Cost Manager. "Do it right first time". Maruti Suzuki initiated a programme called ³Challenge 50:30´ whereby cost was reduced by 30% and productivity was improved by almost 50% during the 3 years ending March 2006. Safety "Home or work place.e. Setting trends in new products and achieving customer delight starts with Manufacturing Excellence and Maruti's manufacturing excellence hinges around four important pillars-Cost. Safety and Productivity. Quality.But the automation level at Maruti Suzuki plants is not as par with its parent company Suzuki Motor Corporation. which is a strategy to achieve Manufacturing Excellence evolved through participative approach PMS is y y y y A system which is people driven and ensures involvement of all levels ( Managers. The reason might be availability of low cost labor. He is a key contributor in suggesting how to keep costs of production under control. entails wastage in terms of repairs and replacements. is the principle followed to avoid wastage. Safety takes First Place". This has been the motto of the company where safety is concerned. Executives. Quality A product of poor quality requires repeated inspections. Supervisors ) A system which ensures ownership A system which brings in standardization of systems & processes A system which ensures Sustainability Maruti Production System or MPS draws learning's from its parent company Suzuki Motor Corporation's concepts on `lean manufacturing' under Suzuki Production System i. SPS. 11 .
The Company has jointly developed with the Indian Railways. such as advertising. Maruti Suzuki offer a two-year warranty on all the vehicles at the time of sale. lease and fleet management. Anticipate and address the customer¶s needs and preferences in all aspects and stages of car ownership (MARUTI SUZUKI refers to this as the ³360 degree customer experience´ Maruti Suzuki has been aggressively cutting prices of its models. the mega car terminal houses a state-of-the-art 'Washing and Waxing Inspection' centre. training and development. finance and insurance. high speed and safe car transportation system.3 Outbound Logistics Are the activities required to get the finished product to the customer. The extended warranty program is intended to maintain the dealer¶s contact with the customer and increase the revenue generated from sale of spares. quoting. a car stockyard and a parking area.1. Reduce the customer¶s cost of ownership of our cars.4 Marketing and Sales Provide means by which buyers can purchase the product and inducing them to do so. material handling. True Value Solutions Limited (TVSL). special Auto Wagons. promotion. the Company commissioned a dedicated Roll-on Roll-off car terminal at Mundra sea port in partnership with MPSEZL (Mundra Port and Special Economic Zone Limited). Sales network 12 . 3. storing. or upgrade to a new Maruti car. to support a high capacity. Maruti¶s marketing objective is to continually offer the customer new products and services that: 1. An effort is made during the period of the extended warranty to encourage the customer to exchange his existing Maruti car for a new Maruti car. Sales network MARUTI SUZUKI has the largest network of dealers amongst car manufacturers in India. sales force. The rationale behind the price cuts is the focus on offering new upgraded vehicles at a low price. channel relations. in the case of manufacturing defects. The company also intends to promote the business in the areas of pre-owned cars. accessories and automobile-related services. MARUTI SUZUKI also offers an extended paid-warranty program marketed under the brand. in accordance with practices and procedures prescribed by MARUTI SUZUKI. channel selection. including collecting. and pricing. To support its export shipments. and 2. in the case of defective components. or bear the cost ourselves.1.3. order processing and scheduling. ³Forever Yours´ for the third and fourth year after purchase. of which the Company's share is 40%. provides value-added services to owners and users of motor vehicles on matters relating to manpower services with regard to recruitment.MARUTI SUZUKI analyze warranty claims from dealers and either claim the cost from the vendors. 2002 as a wholly owned subsidiary of Maruti. Built with an initial investment of Rs 1 billion. which was incorporated on January 14. The dealers subsequently claim the warranty cost from MARUTI SUZUKI. physically distributing. The dealers are required to address any claim made by a customer. delivery vehicle operation. under the provisions of the warranty in force at that time.
Some of these Service Stations are integrated into the sales process in order to increase sales of the cars and related products and services such as spares and accessories. There are more than 400 Maruti dealer workshops and more than 1. MARUTI SUZUKI has launched service stations under the brand ³Maruti Service Masters or MSMs.500 Maruti Authorized Service Stations. The availability of these related products and services at sales outlets also helps to attract customers to the outlets and promotes sales of the cars. The sales of spares. such as installation. The ³Balanced Scorecard´ serves as an effective incentive for dealers to enhance their performance. In order to assist the dealers in enhancing their performance and capabilities. Many of the Service Stations are at remote locations where MARUTI SUZUKI does not have dealers. repair. 24-hour mobile service is also offered under the brand ³Maruti Onroad Service´. insurance and financing. Dealers who perform well on the ³Balanced Scorecard´ are reward with a cash payment at the end of the fiscal year. Agreements with the dealers are usually of five years. financial management and management systems is measured.1. These are distributed through the dealer network and through the authorized sellers of the spare parts. training. spares are sold under the brand name ³Maruti Genuine Parts´. the performance of a dealership in several areas of operations. service. covering more than 900 cities in India. These agreements are generally renewable for successive terms of three years. Using this tool.is linked with the MARUTI SUZUKI through the secure extranet based information network. The performance of the dealers is followed and improvements are suggested frequently. MARUTI SUZUKI also has service stations on highways in India under the brand ³Express Service Stations´. In addition. reliable spare parts for its products. and product adjustment 13 . supply of spare parts and other services that promote sales of cars within the territory for which they are appointed. after sales service. by mutual agreement. 3. sales of cars.5 Serv ice Aims to enhance or maintain the value of the product. The Sales & Marketing Strategy of Maruti Suzuki can be summarized as: y y y y y Continually enhance their product range Increase reach and penetration Increase the availability of automobile finance Ensure repeat business by offering a ³360 degree customer experience´ Continually reduce costs across the value chain (through increase in levels of localization and reduction in number of platforms). parts supply. MARUTI SUZUKI has introduced a concept of ³Balanced Scorecard´. or MGP. As a benchmark for dealers with respect to service quality and infrastructure facilities. spares and accessories. MARUTI SUZUKI dealers provide services to customers such as predelivery inspection of vehicles. including sales. To promote sales of spare parts and the availability of high quality. Dealers are required to maintain their outlets in accordance with the specifications and employ well trained sales staff. accessories and Automobile related services such as insurance and finance serve as additional sources of revenue for the dealers.
Maruti Mobile Support is a first of its kind initiative and is expected not only to help the company reach out customers in metro cities but also as a mean to reach semi urban /rural areas where setting up of new workshop may not be viable. the company worked on an antitheft immobilizer or "I-Cats. These are done for customers who are hard pressed for time. There are more than 400 Maruti dealer workshops and more than 1.Maruti Suzuki has the largest network of dealers and service centers amongst car manufacturers in India. AC & Pollution check up. covering more than 900 cities in India.Technician Bays" As the name suggests the company set out to delight its customers by offering them faster car service by introducing new concepts such as Express Service Bays & 2. Mega Camps The company aggressively conducts 'Mega Camps' throughout the country round the year." system for all its new cars. wheel alignments etc. Complete car needs The company's effort of providing all car-related needs -. Over the last few years. extended warranty and eventually exchanging the existing car for a new one -under one roof at dealerships also enhances customer satisfaction. Car Safety device: Immobilizer The company used technology to meet customer needs and even delight them. Key Initiatives Car pickup & delivery facility for women car owners Setting up "Express Service Bays" & "2 . Service at your Door Step through Maruti Mobile Support Another unique initiative is the door step service facility through Maruti Mobile Support. or MASSs. These initiatives ranged from product design and quality to network expansion. 14 .500 Maruti Authorized Service Stations. Following feedback that the company's cars were more prone to theft owing to their resale value. In these competitive times the challenge is to keep inventing newer ways of doing things to keep the customers in your fold. the company strengthened the existing practices and experimented with many new initiatives by way of kaizens (continuous improvements) to delight its customers. Activities undertaken during a mega camp include complimentary car wash.Technicians Bays. and included new service programs to meet unsaid needs of customers.from learning to drive a car at Maruti Driving Schools to car insurance. oil and fuel top ups.
3.2 Seco ndary activities at Maruti Suzuki are: 3. Research & Development (R&D) During 2008. like sheet metal. and other technology development used to support the value chain. Now. 15 . the number of engineers will be scaled up to 1000 by 2010. is outsourced. An informal Suppliers' Club has been formed by the Company's vendors and it gives a good forum for building personal relationships. understanding key issues and exchanging best practices at the CEO level. The first was with Magneti Marelli. The Company has identified this as an opportunity for further quality. Japan for production of exhaust system parts. In the early eighties. The second focus area for component cost reduction is raw material yield improvement across all manufacturing processes.2. Over the next two decades. the Company made significant efforts in trying to develop a component industry from ground zero. Both the above joint ventures are located in this Suppliers Park. The total cost of raw material as a percentage of net sales ranges from 15% to 20%. Every component is studied in detail and innovative ideas are tried. upgradation and cost reduction. About three fourth of the car. the relationship has matured and most direct vendors or Tier 1 vendors are competent enough to work on their improvement. 3. close to its car plant on an area of 100 acres for Just-In-Time supplies. forgings and machining. to reduce the input material weight for the same component output. The Company is setting up a Suppliers Park in Manesar. In the year 2007-08. process automation. about 110 foreign technology collaborations were facilitated and Maruti Suzuki engineers worked closely with the vendors' engineers to enable to deliver cars which are both high quality and cost competitive.2. the Company signed two joint venture agreements with global component manufacturers for cost reduction through localization of components for Maruti Suzuki cars. Any improvement in the car in terms of technology and design. In line with this. The number of engineers in R & D went up from 258. by value. but there is major scope for modernization of some sections of Tier 2 vendors. inhouse.1 Procurement The function of purchasing raw materials and other inputs used in the firm¶s value creating activities. to 398 engineers by the end of the year. at the start of the year. Specific areas in which R&D has been carried out by the company: y y Building Full Mode Change Capability Vehicle Design and Development Benefits derived as a result of above R&D y Launch of SX4. aimed at the production of electronic control units (ECU) for diesel engines and the second with Futaba Industrial Company. quality or cost has to essentially include the Company's vendors and their support.2 Technology Development Technology development includes research and development. castings. the Company took decisive steps towards building design and development capability.
(Efforts made towards technology absorption. The solution has helped dealer managements to access a wide range of information about their operations. Value Analysis/Value Engineering (VA ±VE) at the time of design and localization to maximize cost benefit. . flood & earthquake safety with multiple level of access control to ensure high availability & information security to the organization. It has deployed a world class Dealer Management Solution across its vast network of dealers throughout the country. ensuring that the new models are profitable from day one. Information Technology In recent years. Global sourcing and advanced sourcing to get the advanced technologies into India at lower costs. Continuous reduction in product cost through VA-VE.Significant cost reduction of new model parts compared to existing models. the Company has used IT to enhance interface with the customer. adaptation and innovation y y y y y y Localization. Launch of Swift DZire. Acquiring design and cost knowledge through teardown and benchmarking and using it in future designs and cost reduction. Design and development of electronic speedometers. keyless alarm controllers for enhancing comfort and convenience. development and testing of parts for existing and new models. The Company now has a world class data center. Significant cost reduction obtained in existing models. Capabilities strengthened in component and vehicle evaluation. as also customer satisfaction and feedback. It incorporates best practices of data centre infrastructure encompassing fire. style and better value for money. A comprehensive set of operational policy & procedures are in place to monitor the data center.y y y Launch of Swift Minor. CNG and LPG. Compliance to new regulations. y Benefits derived from above efforts y y y y y Indigenization of various vehicle aggregates at lower costs. Improvement and up-gradation of existing models for improved comfort. The Company got the ISO 27001 Certification renewed during the year. Technology absorption. benchmarking and design optimization. 16 . Information security continues to be a focus area and comprehensive security policy and procedures are reviewed on regular basis. Capabilities being further strengthened in area of alternative fuels like Diesel. Focused model cost down. adaptation and innovation by either local vendors and helping world-leading component suppliers to set up shop in India).
The Company conducts programs such as "Bulandi" and "Chunauti" for the workmen and technicians to enhance pride in being an employee of the Company and also to create team synergy. The Company has. the United Kingdom and Switzerland.10 crores on training of its employees.521 employees (March 2007) to 7. The outbound training programs (OBT) encourage learning while having fun. family members of the employees are invited to interact with top management to get a feel of the workplace and environment. While training targets in terms of man days were exceeded. 3200 programs have been conducted covering more than 13000 dealers' sales persons. The Company goes further and trains its dealers' and vendors' workforce. spent about Rs. Testing & Quality Certificate). Industrial Relations were cordial throughout the year and no man days were lost on account of strikes or disruptions. also helped retention. accounting. 3. The policy of a fast track for a small number of employees. what is more important is that people development initiatives in general were made more effective and relevant. legal.090 (March 2008).885 suggestions during 2007-08. one or more retreats take place so that the Directors can unwind and take a detached view of self development and the organization. Employees implemented a record 108. The Company has again been awarded ISO: 27001 Certification by STQC Directorate (Standardization. The training encourages team work and teams come back fully motivated to face future challenges. This has lead to net savings of worth Rs. which is as old as the Company. training. In programs like "Family Connect" and "Parivar Milan". 666 million in 2007-08 as against Rs. government affairs and quality management Maruti Suzuki produces high quality products. 509 million in 2006-07. The Company's key strength is its human capital. the focus of the programs is to inculcate leadership qualities while at the Director level. Government of India after re-assessment. Much of this growth was accounted for by shop floor workers in line with capacity expansion at the Manesar Plant. At the middle management level. Ministry of Communications and Information Technology. There were customized training programs in strategy and leadership for general managers.428 suggestions received previous year. during 2007-08. finance. The Company introduced a program enabling select employees to pursue higher education in management and technical fields. Germany. introduced last year. as against 85. The Company is thus certified to meet international standards for maintaining information security. The Company strengthened the concept of Stay Interviews (as opposed to exit interviews). 17 . The number of employees increased from 5. some of which are been exported to various countries including the Netherlands.2. continued to make a significant contribution to business performance. planning. delight factors and areas for improvement.3. Italy. development and compensation of employees.2. The Suggestions Scheme. The Company's "Maruti Centre of Excellence" (MACE) is a team dedicated to the development of vendors' employees. to understand employee aspirations.3 Human Reso urce Management Activities associated with recruiting.4 Firm Infrastructure Firm infrastructure consists of general management. The idea is to develop better understanding and increase the support and co-operation for the employees from their families.
Maruti Suzuki was certified with ISO: 9001:2000 in 2001 and aim to achieve the TS-16949 certification. declined by approximately 65% from fiscal 2002 to fiscal 2004. Maruti Suzuki uses its parent company Suzuki Motor Corporation¶s distribution network wherever available in the foreign market. In 2008-09 Maruti Suzuki had signed contract with Nissan.000 cars in 2007-08 and the company has set a target to export 200.000. or continuous improvement. For example. Some of the other improvements as a result of the Kaizen process have been increased automation through automated material transport system. Based on the belief that individuals contribute to improvement in growth. Another feather in Maruti Suzuki¶s cap in the field of quality is its Press Shop & associated functions certification for conformance to the requirements of TS16949 standard. This deal is expected to add upwards of 30. Maruti Suzuki merely exports vehicles and sell them in the foreign market. In house warranty: Maruti Suzuki¶s in-house warranty costs per vehicle. Roll off (RORO) berth which speeds up the loading process and minimizes the chance of damage to cars. to (2) the number of vehicles sold. Africa and Oceania. The average number of suggestions made per employee has improved by approximately 35% in fiscal 2004. 18 . computed as the ratio of (1) the cost of components rejected due to defects arising during our production process. who buys Maruti Suzuki¶s ³A-Star´ car and retail it in Europe under the brand name ³Pixo´. as compared to fiscal 2002. which signifies the percentage of vehicles that pass through the inspection stages as defect-free.000 cars annually by 2010-11. when suggestion received were more than 80. Maruti Suzuki has exported 53.3 Internatio nal ization of value chain Maruti Suzuki has expanded in the foreign markets. it had made the following improvements in terms of producing defect-free products: DFC OK: Maruti Suzuki¶s Direct Final Check OK. Latin America. there has been a suggestion scheme in which they promote participation of all employees at all levels. the Company entered into an agreement with Mundra Port and Special Economic Zone Limited (MPSEZL) in 2008-09 to develop a mega car terminal at Mundra Port for export of Company's products. declined by approximately 85% between fiscal 2002 and fiscal 2004. Asia. Kaizen Maruti had adopted the Japanese management concept of Kaizen. 3. to (2) the numbers of vehicles sold in the fiscal year. The export strategy of Maruti Suzuki is that it keeps almost all value activities within India. Maruti Suzuki exported the first lot of 500 cars to Hungary in 1987. or DFC OK percentage.000 units in export sale in the coming years. In addition. Presently it exports to over 100 markets in Europe. computed as the ratio of (1) the aggregate cost of components incurred by us to service warranty claims arising from operational defects in our manufacturing lines. Group discussions among employees in different departments are conducted on a monthly basis in order to discuss and resolve problems relating to their areas of operation. improved from approximately 77% in March 2002 to approximately 90% in March2004. To meet such specialized requirements. The Kaizen activities had resulted in the improvement of the in-house capabilities. This car export terminal offers a ³Roll on. Reduction in rejection: Maruti Suzuki¶s in-process rejection cost per vehicle. an activity referred as quality circle activity. they had manufactured 25 multi-axis robots and 16 multi-spot welders.
The first successfully model. who were transferred from large public and private companies. This arrangement ensures availability of requisite infrastructure at the Port and export of products in an efficient manner. and in-house were successfully transferred to the work culture of Maruti Suzuki. it recruited fresh graduates from the technical/engineering colleges to fill up most of the middle and lower level management positions. Suzuki Motors deputed several Japanese workers and executives in the Indian factory at Gurgoan. Most of the management systems of Suzuki Motors were adapted in Maruti Udyog Limited. Globally. quality checking systems are installed at the suppliers end and this generates reports which only go to Maruti electronically. several Indian employees from MUL were deputed to SMC's factory in Japan. but produce components in relatively distant plants. The history of Maruti Suzuki shows signs of a shift from a "Standardised and Goal achievement oriented" organisation to the "Innovative/Creative and Entrepreneurially oriented" organisation that it has become today When Maruti Suzuki started. As the fresh graduates were not biased by any previous management styles. quality checks of all delivered components were done at Maruti factory only. majority of the car components were imported from developed countries. It was based on the Suzuki Alto. At that moment it was the only modern car in India (as compared to its competitors Hindustan Ambassador and Premier Padmini). the company in partnership with Indian Railways has developed double decker rail wagons to transport export cars from Manesar manufacturing facility to Mundra Port. Contrary. was introduced in 1983 with a 796 cc engine. to the logic of most foreign automobile manufacturers. most of the features of Japanese management system such as Quality Circles. 19 . Suzuki pulls its supplier to be located near the plant. Maruti 800.In a first of its kind initiative. Second. most of the middle and lower level positions were filled by fresh graduates. As many as six to seven employees of Suzuki Motors were deputed to work in the Indian factory. Under the current system. they could easily be trained with the management style that Suzuki Motors introduced in the joint venture. It would be apt to say that the company started as a global player and is now moving towards becoming a transnational. near New Delhi. Suzuki has focused on the lean production system where thrust is given on the reduction of inventory cost and testing time. company union. employee participation in the production decision making. In India some suppliers only assemble the final parts or modules at the plant located near to Maruti factory. except for a few in the top management. 4 Global Integration Vs Local responses Suzuki foray's into India can be categorised as somewhere between Global and Transnational. Suzuki Motors perceived that the hierarchy system in the Indian society greatly influenced the work culture in most Indian factories and it also faced similar problem in setting up a flat organization structure that would most benefit from the introduction of its own management system that it practiced in Japan. In addition. During the initial stage. it undertook an extensive training program for the fresh recruits. It employed two methods to overcome this problem. This exchange process of employees helped the smooth transfer of Japanese management systems to Maruti-Suzuki in India and has increased the overall factory productivity. Earlier. The top management from the Indian side also supported the introduction of Japanese style of management in the factory. production incentives. In fact. First.
is now investing $310 million in a new research and development center in nearby Rohtak. emissions labs. Suzuki Motor Corporation (SMC) is pursuing a world strategy designed for long-term growth. In contrast to the above scenario. Maruti Suzuki India. It has a newly developed Euro 5-compliant 1. today. After 1991. It will include test tracks. a crash-test facility.0litre aluminium petrol engine with C02 emissions lower than those of European competitors (target lower than 1 O9gfkm). Following the launch of its acclaimed fourth world strategic model. Maruti Suzuki India Ltds R&D team in Gurgaon have designed the concept car that is being pitted as the global Indian car. the Splash (named Ritz in India). The car almost changes the way the world's perception of Indian auto designers. 20 . at the 2007 International Motor Show. Maruti Suzuki initiated strategic responses to cope with India's liberalisation process and began to redesign itself (to be able to compete with the new automobile players coming to India). This new facility which will be Suzuki's first major R&D center outside Japan and is scheduled to be completed by 2015. a wind tunnel and a durability testing center. Saurabh Singh and Rajesh Kumar Gogu have helped in shaping Suzuki Motor Corporations A-Star Concept car. The Concept A-Star is the first concept car in which designers from Maruti Suzuki India's research-and-development division have been involved from the initial stage for its styling.000 cars per annum by the year 2000. the company developed the A-segment five-door hatchback reflecting a focus on world-class environmental compatibility and comfort. Eventually. Suzuki wants the Rohtak complex to serve as its global small-car development hub.Suzuki Motor predicted Indian market potential to rise to 200.