Case-Maruti Udoyg Ltd

What is the Mission of MUL?
What the company is and what its goals or objectives are…. “MUL is a government controlled automobile company which while focusing on the small car strives to achieve the excellence of modern technology and work culture”

MUL’S STRATEGY

To go for the “mass market” with a quality product and a foreign collaboration. Capture a dominant market share, and then try to capture additional market segment through introduction of new products.

Maruti has not achieved its Mission
• Market Segment (Smaller car middle class consumer market as per mission statement) • However it catering upper strata society. • Govt. lifted concessions • With rise of price there is no substantial difference between Maruti, Ambassador and Premier.

Unfair Disadvantage
An automotive factory to produce a small, low cost car economically has to meet some fundamental requirements, viz: • Access to lowest cost components and materials of the best quality in the world • Incur minimal logistical costs (Location disadvantage) • Proximity to an engineering infrastructure • A production volume of at least 250-3-0 thousand per year to enjoy full economics of scale

The Generic Value Chain(Porter)

What Maruti has achieved
• The record of completing the plant in 13 months and achieving 50% share by 1985 is commendable. • Consistent Profit from 1983-84 to 1986-87 • Our put: Cars per employee Maruti (30:1) Indian automobile Industry(12:2) Suzki (70:1)

Difficulty in achieving Japanese Management Style
Page 61 “Though Mr O Suzi stronly believes maruti must be prepared to accept Japanese management style……….but at the stage of implementation..”. Absenteeism was a cause of concern.. Malpractices for reimbursement…

Learn from Japanese Management style….
• More people oriented management style. • Consider workers as long-term Corporate asset. • Training to Employees

Holistic Marketing Dimensions

Competitive Strategy
Should position itself for younger age group, small family. Maruti started with 100,000 vehicle capacity. With 50% capacity utilization it can become market leader. Capacity output of other cars-30,000-50,000 units

Manufacturing Strategy
• By adopting a policy of keeping in house manufacturing limited to 30%, fixed cost is low so breakeven point is low. • Quality and timely supply of components since 30% self manufacturing. • By laying emphasis on quality and delivery by vendors , it is able to reduce inventory levels (with material at times supplied directly to shops just-in-time)

Foreign Collaboration
• Rapid Indigenization of components More no. of ancillary manufacturing units for making quality and critical components • Low Productivity of Indian Labor

Impact of Maruti on Competitors
• Maruti’s target segment –Household user segment: Competitors- Institutional Buyers • Now more Competitors: Hyundai

Future Strategy
• In India purchasing power of small luxury car is very limited • Should follow strategies of South Korea and Taiwan: (Local Demand less) • Should follow strategy of export-led growth • Seller’s to Buyer’s Market • Should take measures to reduce cost • Complete indigenization to get out of the effects of import duties.

Future Strategy
• Managing Human Resources • Redefining automobile policy in terms of cost of importing components. “Is the car a vehicle of development of country’s economy?”

Suzuki-Nissan seek port for carsBusiness Standard: October 11, 2006
• Car manufacturer Maruti Suzuki is planning to team up with multinational automobile major Nissan Motor Company for developing a greenfield dedicated port to ship out vehicles. • The cost of a greenfield facility will go up to Rs 3,500 crore as port operators will have to dredge up to 15 metres depth for a shipping channel. The cost may come down if a major port extends a terminal to these players,” port experts said. • “The coming together of Maruti Suzuki and Nissan makes sense as the latter has a tie-up with Maruti for design of cars in India. A common automobile port will cut down the cost for both players,” • At present, automobile majors are shipping their cars primarily from Mumbai and Chennai. • Mahapatra said the idea behind such a port was to cut down the logistics cost and streamline the export operations of these companies.

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