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Case Study On Maruti Suzuki

Article  in  iBusiness · March 2021

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Assignment 2

Name ABDEALI BHARMAL

enrol 91920424002

Subject International Business

Marwadi University Rajkot

MNC

Maruti Suzuki
Maruti Suzuki India Limited, formerly known as Maruti Udyog Limited, was an Indian government owned
automotive manufacturer company, founded by Government of India in 1981, headquartered in New
Delhi, India. This company signed the license and joint venture agreement with Suzuki Motor Corporation
in 2 October, 1982. It is now a subsidiary of the Japanese automotive manufacturer Suzuki Motor
Corporation.[6] As of July 2018, it had a market share of 53% in the Indian passenger car market.[7][8]

Joint Venture

Relationship between the Government of India, under the United Front (India) coalition and Suzuki Motor
Corporation over the joint venture was a point of heated debate in the Indian media until Suzuki Motor
Corporation gained the controlling stake. This highly profitable joint venture that had a near monopolistic
trade in the Indian automobile market and the nature of the partnership built up till then was the
underlying reason for most issues. The success of the joint venture led Suzuki to increase its equity from
26% to 40% in 1987, and to 50% in 1992, and further to 56.21% as of 2013.[18] In 1982, both the venture
partners entered into an agreement to nominate their candidate for the post of Managing Director and
every Managing Director would have a tenure of five years.[19][20]

Manufacturing Facilities

Maruti Suzuki has two manufacturing facilities in India.[21] All manufacturing facilities have a combined
production capacity of 1,200,000 vehicles annually. The Gurgaon manufacturing facility has three fully
integrated manufacturing plants and is spread over 300 acres (1.2 km2).[22] The Gurgaon facilities also
manufacture 240,000 K-Series engines annually. The Gurgaon facility manufactures the Alto 800, WagonR,
Ertiga, XL6, S-Cross, Vitara Brezza, Ignis and Eeco. The Gurgaon facility also assembles the Jimny starting
from January 2021 solely for export markets. It was reported the Indian-assembled Jimny will be exported
to African markets and countries in the Middle East.[23]

The Manesar manufacturing plant was inaugurated in February 2007 and is spread over 600 acres (2.4
km2).[22] Initially it had a production capacity of 100,000 vehicles annually but this was increased to
300,000 vehicles annually in October 2008. The production capacity was further increased by 250,000
vehicles taking total production capacity to 800,000 vehicles annually.[24] The Manesar plant produces
the Alto, Swift, Ciaz, Baleno and Celerio. On 25 June 2012, Haryana State Industries and Infrastructure
Development Corporation demanded Maruti Suzuki to pay an additional Rs 235 crore for enhanced land
acquisition for its Haryana plant expansion. The agency reminded Maruti that failure to pay the amount
would lead to further proceedings and vacating the enhanced land acquisition.[25]

In 2012, the company decided to merge Suzuki Powertrain India Limited (SPIL) with itself.[26] SPIL was
started as a JV by Suzuki Motor Corp. along with Maruti Suzuki. It has the facilities available for
manufacturing diesel engines and transmissions. The demand for transmissions for all Maruti Suzuki cars
is met by the production from SPIL.

In 2017, the new Suzuki Motor Gujarat facility was opened. This third facility is not owned by Maruti Suzuki,
but instead wholly owned by Suzuki Motor Corporation. Despite that, the plant supplied vehicles to Maruti
without any additional cost. Located in Hansalpur, Ahmedabad, the plant has the total annual capacity of
500,000 units.

Analysis

Since its founding in 1983, Maruti Udyog Limited has experienced problems with its labour force. The
Indian labour it hired readily accepted Japanese work culture and the modern manufacturing process. In
1997, there was a change in ownership, and Maruti became predominantly government controlled.
Shortly thereafter, conflict between the United Front Government and Suzuki started. In 2000, a major
industrial relations issue began and employees of Maruti went on an indefinite strike, demanding among
other things, major revisions to their wages, incentives and pensions.[29][30]

Employees used slowdown in October 2000, to press a revision to their incentive-linked pay. In parallel,
after elections and a new central government led by NDA alliance, India pursued a disinvestment policy.
Along with many other government owned companies, the new administration proposed to sell part of
its stake in Maruti Suzuki in a public offering. The worker's union opposed this sell-off plan on the grounds
that the company will lose a major business advantage of being subsidised by the Government, and the
union has better protection while the company remains in control of the government.[29][31]

The standoff between the union and the management continued through 2001. The management refused
union demands citing increased competition and lower margins. The central government privatized
Maruti in 2002 and Suzuki became the majority owner of Maruti Udyog Limited.[32][33]
Manesar violence Edit

On 18 July 2012, Maruti's Manesar plant was hit by violence. According to Maruti management, the
production workers attacked supervisors and started a fire that killed company's General Manager of
Human Resources Avineesh Dev and injured 100 other managers, including two Japanese expatriates. The
workers also allegedly injured nine policemen.[34][35] However Maruti Suzuki Workers Union (MSWU)
President Sam Meher alleged that management ordered 300 hired security guards to attack the workforce
during the violence.[36] The incident is the worst-ever for Suzuki since the company began operations in
India in 1983.[37]

Since April 2012, the Manesar union had demanded a three-fold increase in basic salary, a monthly
conveyance allowance of ₹10,000, a laundry allowance of ₹3,000, a gift with every new car launch, and a
house for every worker who wants one, or cheaper home loans for those who want to build their own
houses.[38][39] According to the Maruti Suzuki Workers Union a supervisor had abused and made
discriminatory comments to a low-caste worker, Jiya Lal.[40] These claims were denied by the company
and the police.[35] Maruti said the unrest began, not over wage discussions, but after the workers' union
demanded the reinstatement of Jiya Lal who had been suspended for allegedly beating a supervisor.[37]
The workers claim harsh working conditions and extensive hiring of low-paid contract workers which are
paid about $126 a month, about half the minimum wage of permanent employees.[40] On 27 June 2013,
an international delegation from the International Commission for Labor Rights (ICLR) released a report
alleging serious violations of the industrial right of workers by the Maruti Suzuki management.[41]
Company executives denied harsh conditions and claim they hired entry-level workers on contracts and
made them permanent as they gained experience.[38] Maruti employees currently earn allowances in
addition to their base wage.[42]

The police, in its First Information Report (FIR), claimed on 21 July that Manesar violence is the result of a
planned violence by a section of workers and union leaders and arrested 91 people.[43][44] Maruti Suzuki
in its statement on the unrest,[45] announced that all work at the Manesar plant has been suspended
indefinitely.[37] The shut down of Manesar plant is leading to a loss of about Rs 75 crore[46] per day.[47]
On 21 July 2012, citing safety concerns, the company announced a lockout under The Industrial Disputes
Act, 1947 pending results of an inquiry the company has requested of the Haryana government into the
causes of the disorder. Under the provisions of The Industrial Disputes Act for wages, the report claimed,
employees are expected to be paid for the duration of the lockout.[46] On 26 July 2012, Maruti announced
employees would not be paid for the period of lock-out in accordance with Indian labour laws. The
company further announced that it will stop using contract workers by March 2013. The report claimed
the salary difference between contract workers and permanent workers has been much smaller than
initial media reports – the contract worker at Maruti received about ₹ 11,500 per month, while a
permanent worker received about ₹12,500 a month at start, which increased in three years to ₹21,000-
22,000 per month.[48] In a separate report, a contractor who was providing contract employees to Maruti
claimed the company gave its contract employees[49] the best wage, allowances and benefits package in
the region.[50]

Shinzo Nakanishi, managing director and chief executive of Maruti Suzuki India, said this type of violence
has never happened in Suzuki Motor Corp's global operations in Hungary, Indonesia, Spain, Pakistan,
Thailand, Malaysia, China and the Philippines. Nakanishi apologised to affected workers on behalf of the
company, and in press interview requested the central and Haryana state governments to help stop
further violence by legislating decisive rules to restore corporate confidence amid emergence of this new
'militant workforce' in Indian factories. He announced, "we are going to de-recognise Maruti Suzuki
Workers' Union and dismiss all workers named in connection with the incident. We will not compromise
at all in such instances of barbaric, unprovoked violence." He also announced Maruti plans to continue
manufacturing in Manesar, that Gujarat was an expansion opportunity and not an alternative to
Manesar.[51][52]

The company dismissed 500 workers accused of causing the violence and re-opened the plant on 21
August, saying it would produce 150 vehicles on the first day, less than 10% of its capacity. Analysts said
that the shutdown was costing the company 1 billion rupees ($18 million) a day and costing the company
market share.[53] In July 2013, the workers went on hunger strike to protest the continuing jailing of their
colleagues and launched an online campaign to support their demands.[54]

A total of 148 workers were charged with the murder of Human Resources Manager Avineesh Dev. The
court dismissed charges against 117 of the workers. On 17 March 2017, 31 workers were found guilty of
variety of offences. 18 were convicted on charges of rioting, trespassing, causing hurt and other related
offences under Indian Penal Code sections. The remaining 13 workers were sentenced to life in
imprisonment after being found guilty of the murder of General Manager of Human Resources Avineesh
Dev. Twelve of the thirteen sentenced were office-bearers of the Maruti Suzuki Workers Union at the time
of the alleged offences. The prosecution had sought the death penalty for the thirteen.[55]

Both prosecution and defence have announced they will appeal against the sentences. Defence counsel
Vrinda Grover stated, "We will file appeals against all convictions in the HC. The evidence, as it stands,
cannot withstand legal scrutiny. There is no evidence to link these workers to the murder. The 13 who
have been convicted, it’s important to remember that they were the leaders of the union. Therefore, it is
clear that this is targeted framing of these persons. We hope for justice in the superior court".[56]
The Maruti Suzuki Workers Union is continuing to organise industrial action and protests calling for the
workers to be released and criticising the judgement and sentences an unjust.[57] An international appeal
for the release of the workers has been made by the International Committee for the Fourth International
(ICFI) and other organisations such as the Peoples Alliance for Democracy and Secularism

Departmental Study.

It is basically a subsidiary company of Japanese automaker Suzuki Motor Corporation which has a market
share of 44.9 of the Indian car market. Maruti offers a large number of cars from the entry level Maruti
car to the Sports Utility vehicle Grand vitara. It is basically a first company in India who sells more than
one million cars in India. It may be renamed as in India as Maruti Suzuki India limited. It was formed in
February 1981and the original production was started mainly in 1983 with the car Maruti 800. The
company basically exports more than 50,000 cars and has the excessive selling in the domestic market
with more than 750,000 cars per year.

Organization Structure Design At Maruti Suzuki

Maruti has a functional organizational structure with horizontal linkages. The activities are divided based
on the following functions finance, marketing, engineering and sales, spares, production, material, parts
inspection, quality assurance, human resource development, information technology, new business and
administration, The centralization is very low in Maruti as the decision-making authority is quiet
decentralized and disturbed across all levels. it is a very big organization and further divided into smaller
divisions. There are 29 divisions in Maruti and are headed by one divisional head which is a functional
post. These divisions are divided into 132 departments and which are headed by one departmental head
which is again a functional post. In Maruti the formalization is very high all the methods, procedures,
standards are written down formally. All the departments have department procedures which describe
the role of work of the department as well as their responsibilities and work flow. The procedures are
approved by divisional head and are also available for the concerned departments. In production shops
the standard operating procedures are displayed on the workstations and are known as Maruti Operations
standards.

The structure of Maruti is flat .Generally the employees are divided into six functional heads namely
workers and technicians, supervisors, executives, section manager, department manager and division
manager.

Changes in structure

In view of increasing competition the automotive sector Maruti has tried to use a project based structure
to handle the problems effectively. Around two year back in meeting of senior and middle level executives
to form teams which would focus on specific goals. Around 30 teams of about 8-10 members are formed.
These teams have specific mandates in terms of cost reduction and new product development and were
given resources and authority in order to implement the project.

For example-

One team worked on value analysis and value engineering for specific components for cost reduction.
Another team worked on improving JD power ratings that Maruti secured for IQS (initial quality service).
These teams were working on a high priority and all the departments would likely to co-operate. Also they
reported to the JDM directly and this helped them to sort out any problems they encountered. The best
performing teams were rewarded handsomely.

Organization structure at Maruti

The organization structure of Maruti is somewhat inclined towards a mechanistic structure but it cannot
be called absolutely because of presence of high degree of decentralization. It has a functional structure
with horizontal linkages. The functional divisions finance, marketing, sales focus on their respective
functions. These divisions are further divided into 29 divisions. The hierarchy consists of a divisional head
and then a departmental head.

Mechanistic structure is suitable for those organizations which do not require frequent changes in their
processes and the environment is stable.

Features Of Organization Structure at Maruti

The division of employees at six functional levels and their further hierarchical divisions in different
divisions mean that the company wants to achieve perfection at each functional level.

Their production is car and production occurs on a large scale , it includes assembly line in which parts are
added to a product in a sequential manner using optimally planned logistics to create a finished product.

The environment in the automobile sector is almost stable and hence the flexibility in the structure is not
required.
Each functional department tends to get perfection at its level. At horizontal level it involves cross
functional teams and sometimes direct contact in the form of a coordinator from each department who
can communicate the progress in their respective department.

Each function is separate at functional level and communication and co-operation among functions are
responsibility of someone at the top hierarchy.

Communication is mostly vertical from department to division and then directors.

Main decisions are taken by directors in respective functional divisions.

All these feature are in line with the mechanistic structures which are economies to scale, and are
designed to induce people to behave in accountable ways.

Maruti has a Flat and Decentralized structure

Structural elements

Specialization

As the Maruti have functional structure and division of labour so there is high degree of specialization.

Centralization

Power is distributed within the hierarchy because there are various persons who play a very crucial role
in the organization.

Formalization

The instructions, procedures are written down formally in the organization and on the other hand
departments have their own formal procedures of doing work in an organization so that they can achieve
their objectives on time.
Complexity

Complexity arises because of structural complexity as there is goal incompatibility between different
departments.

Span of control

The span of control is generally at the top level is 3-6, 4-8 at the middle level management and 0-8 at the
lower level management. In production level at lower level the span of control is at40-50.

Problems faced by Maruti in the organization structure

Lower level managers take decisions understanding the big picture. While the top level managers have
low information about the local operations as compare to lower level managers.

In decentralization organization there is lack of co-ordination among the managers. This can be reduced
by defining the company policy and communicating throughout the organization.

Lower level managers have objective that are different from the objectives of the entire organization. For
example some mangers are interested in increasing the size of departments as compare to profits. This
problem can be overcome by defining the performance appraisal which helps the managers in defining
their problems.

Flaws in the organization structure

The main flaw is that the employees are facing inter departmental friction in many areas-

Parts inspection vs. engineering

The Parts inspection department would consider the quality of existing and new products. On the other
hand managers in the Engineering department want to reduce cost by localizing the resources or parts.
The process of localization requires the sanction of parts inspection department and this causes a conflict
between both departments.

Marketing vs. others

The Marketing department mainly focuses on that the customer expectations with the company are met
or not. However the recommendations that it suggests are not communicated to the other departments
that is engineering. For Example- After analyzing the data from the customers surveys the marketing
department suggests that the audio systems in Maruti would be of the Blaupukt barnd. This was turned
down however Suzuki had formed a tie up with Pioneer to use its audio systems.

Quality vs. Others

The role of the quality department mainly brings this department into conflict with other departments
mainly production and engineering departments. When the quality department declares that the certain
product or process is not matching with the quality requirements, the concerned department who has
not maintains quality will always protest against it as most of the times such tests are marginal.

Changes in structure

Rewards

Rewards and compensation should be evaluated on a regular basis so that and which leads to greater
linkage to the employee performance and which also leads to increase the goodwill of the company.

People

Frequent interactions with the different departments helps to resolve the problems if any in the
organization.

Processes

There should be more focus on quality assurance as they only focus on very stringent other techniques.

Strategy

There strategy should be focused on more on changing needs of the customers and also the changing
scenario of the industry.

Structure
 As the Maruti is following presently functional structure which has various conflicts in it so Maruti has to
change its structure according to their requirements so that there is no conflicts in future and so that they
will able to achieve organizational objectives efficiently and effectively.

One major point is that there is a need of horizontal integration between the various departments at
departmental level is required .The hierarchical level is is to be reduced because the level of employees
are quiet diversified which created a complicated hierarchy.

Conclusion

Maruti has been successful if the company will be able to get the comparative advantage .the flat
decentralized structure and the importance given to the employees go a long way in creating harmonious
and good working environment where everyone focuses on achieving the objectives of the organization
efficiently and effectively so the company can able to achieve profits in future.

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