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CONTENT

Sr. No. PARTICULARS Page No.

1 Introduction 2

2 History of Automobile Industry In India 3

3 Porter Five Force Model In Indian Automobile Industry 5

4 Maruti Suzuki Ltd. 6

5 Marketing Strategy of Maruti Suzuki Ltd. 9

6 Consumer Behaviour 12

7 Marketing Mix 13

8 Segmenting, Targeting, Positioning 17

9 Porter Five Force Model for Maruti Suzuki Ltd. 20

10 Three Generic Strategies 22

11 SWOT Analysis 23

12 BCG Matrix 26

13 Product Life Cycle 27

14 Ratio Analysis 28

15 Conclusion 37

16 Bibliography

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INTRODUCTION:

The Indian automobile sector is one of its most vibrant industries. The industry accounts for 22

per cent of the country's manufacturing gross domestic product (GDP). It comprises passenger cars, two-wheelers, three-wheelers and commercial vehicles and is currently the seventh-largest

in the world with an average annual production of 17.5 million vehicles, of which 2.3 million are exported. The Indian auto market has the potential to dominate the global auto industry, provided a conducive environment is created for potential innovators to come up with new pilot projects.

The next few years are projected to show solid but cautious growth due to improved

affordability, rising incomes and untapped markets. All these open up an opportunity for automobile manufactures in India. In addition, with the government's backing and a special focus

on exports of small cars, multi-utility vehicles (MUVs), two and three-wheelers and auto components, the automotive sector's contribution to the GDP is expected to double, reaching a turnover of US$ 145 billion in 2016, according to the Automotive Mission Plan (AMP) 2006-

2016.

The automobile industry produced a total of 1,861,849 vehicles including passenger vehicles, commercial vehicles, three-wheelers and two-wheelers in April 2014 as against 1,687,243 in

April 2013, registering a growth of 10.35 percent over the corresponding month of 2013. The growth is mostly attributed to the rise in two-wheeler production.

Two-wheeler sales registered growth of 11.67 percent in April 2014 over April 2013. Within this

segment, scooters, motorcycles and mopeds grew by 26.08 percent, 8.06 percent and 0.23 percent respectively.

In April 2014, passenger car sales stood at 1,786,899 units while utility vehicles sales stood at 525,942 units, as per data from Society of Indian Mobile Manufacturers (SIAM). Export of

utility vehicles showed an improvement of 298 percent with 41,550 units.

Tractor sales in the country will grow at a compound annual growth rate (CAGR) of 8-9 per cent in the next five years making India a high-potential market for international brands such as

Kubota, Case New Holland, AGCO. Same Deutz Fahr and John Deere, according to JD Power Asia Pacific's maiden pilot study on the Indian tractor market.

The cumulative foreign direct investment (FDI) inflows into the Indian automobile industry

during the period April 2000 -May 2014 was recorded at US$ 9,885.21 million, according to data published by Department of Industrial Policy and Promotion (DIPP).

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HISTORY OF AUTOMOBILE INDUSTRY IN INDIA:

The first car on Indian roads ran in 1897. Until the 1930s, cars were imported directly, but in

very small numbers.

An embryonic automotive industry emerged in India in the 1940s. Hindustan was launched in 1942, long time competitor Premier in 1944. They built GM and Fiat products respectively. Mahindra & Mahindra was established by two brothers in 1945, and began assembly of Jeep CJ-

3A utility vehicles. Following the independence, in 1947, the Government of India and the private sector launched efforts to create an automotive component manufacturing industry to

supply to the automobile industry. In 1953 an import substitution programme was launched, and the import of fully built-up cars began to be impeded.

However, the growth was relatively slow in the 1950s and 1960s due to nationalisation and the license raj which hampered the Indian private sector. Total restrictions for import of vehicles

were set and after 1970 the automotive industry started to grow, but the growth was mainly driven by tractors, commercial vehicles and scooters. Cars were still a major luxury item. In the

1970s price controls were finally lifted, inserting a competitive element into the automobile market. By the 1980s, the automobile market was still dominated by Hindustan and Premier, who sold superannuated products in fairly limited numbers. During the eighties, a few

competitors began to arrive on the scene.

To promote the auto industry the government started the Delhi Auto Expo which was had its debut showcasing in 1986. The Auto Expo of 1986 was a window for technology transfers

showing how the Indian Automotive Industry was absorbing new technologies and promoting indigenous research and development for adapting these technologies for the rugged Indian conditions. The nine day show was marked by then Prime Minister Rajiv Gandhi.

LIBERALISATION:

Eventually multinational automakers, such as, though not limited to, Suzuki and Toyota of Japan and Hyundai of South Korea, were allowed to invest in the Indian market ultimately leading to the establishment of an automotive industry in India. Maruti Suzuki was the first, and the most

successful of these new entries, and in part the result of government policies to promote the automotive industry beginning in the 1980s. As India began to liberalise their automobile market

in 1991, a number of foreign firms also initiated joint ventures with existing Indian companies. The variety of options available to the consumer began to multiply in the nineties, whereas before there had usually only been one option in each price class. By 2000, there were 12 large

automotive companies in the Indian market, most of them offshoots of global companies.

Exports were slow to grow. Sales of small numbers of vehicles to tertiary markets and neighbouring countries began early, and in 1987 Maruti Suzuki shipped 480 cars to Europe

(Hungary). After some growth in the mid-nineties, exports once again began to drop as the outmoded platforms handed down to Indian manufacturers by multinationals were not competitive.

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This was not to last. The de-licensing of the industry in 1993 opened the sluice gates a flood of international auto-makers that rushed into what they saw as the last remaining untapped market -

the largest democratic market of the world. The next couple of years saw an unprecedented growth in the industry with assembly lines working overtime to meet demand. Dazzled by the

potential of India's 100 million odd people, car companies planned ambitious capacities. However, India was a much tougher markets than they had imagined. They under estimated Maruti's strangle hold of the bottom end of the market and were unable to compete with it on

price and sheer value for money.

Today India manufactures low-priced cars for markets across the globe. As of 18 March 2013 global brands such as Proton Holdings, Kia, Mazda, Chrysler, Dodge and Geely Holding Group

are shelving plans for India due to the global economic crisis.

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PORTER FIVE FORCES MODEL IN THE INDIAN AUTOMOBILE INDUSTRY:

Threat from New Players: Increasing

Most of the major global players are present in the Indian Market; a few more are expected to enter.

Financial strength assumes importance as high investments are required for building capacity.

Access to distribution network is important. Although important for all segments, having a

distribution network in rural areas is vital for two-wheeler makers.

Lower tariffs in the post-World Trade Organization

era may expose Indian companies to threat of imports (however, the threat may be mitigated by

non-tariff barriers that may still exist).

Market Strength of

Suppliers: Low

A large number of

automotive component suppliers are present in the Indian

automotive industry.

Automotive players

are rationalizing their vendor base to achieve

consistency in quality.

Rivalry within the

Industry: High

There is keen

competition in select segments (such as the Compact and Mid-size

segments in passenger cars, and the motorcycle

segment in two-wheelers).

New multinational

players may enter the

market.

Market Strength of Consumers:

Increasing

Increases awareness among

consumers has raised expectations. Thus, the ability to innovate (technology being the enabler) is

critical.

Product Differentiation via new

features, improved performance and after sales support is critical.

Increases competitive intensity has

limited the pricing power of manufacturers.

Threat from Substitutes:

Low-Medium

With consumer preferences changing, inter-

product substitution is taking place (scooters are being replaced by motorcycles, and Mini

cars by Compact Mid-size cars.

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MARUTI SUZUKI

Maruti Udyog Limited was established in February 1981, though the actual production

commenced only in 1983. It started with Maruti 800, based on the Suzuki Alto Kei car which at

the time was the only modern car available in India. Its only competitors were Hindustan

Ambassador and Premier Padmini. Originally, 74% of the company was owned by the Indian

government, and 26% by Suzuki of Japan. In May 2007, the government of India sold its

complete share to Indian financial institutions and no longer has any stake in Maruti Udyog.

HISTORY:

Maruti's history begins in 1970, when a private limited company named 'Maruti technical

services private limited' (MTSPL) is launched on November 16, 1970. The stated purpose of this

company was to provide technical know-how for the design, manufacture and assembly of "a

wholly indigenous motor car". In June 1971, a company called 'Maruti limited' was incorporated

under the Companies Act and Sanjay Gandhi became its first managing director. "Maruti

Limited" goes into liquidation in 1977. On 23 June 1980 Sanjay Gandhi dies when a private test

plane he was flying crashes. A year after his death, and at the behest of Indira Gandhi, the Indian

Central government salvages Maruti Limited and starts looking for an active collaborator for a

new company. Maruti Udyog Ltd is incorporated in the same year.

SUZUKI’S ENTRY:

In 1982, a license & Joint Venture Agreement (JVA) is signed between Maruti Udyog Ltd. and Suzuki of Japan. At first, Maruti Suzuki was mainly an importer of cars. In India's closed market,

Maruti received the right to import 40,000 fully built-up Suzuki’s in the first two years, and even after that the early goal was to use only 33% indigenous parts. This upset the local manufacturers considerably. There were also some concerns that the Indian market was too small to absorb the

comparatively large production planned by Maruti Suzuki, with the government even considering adjusting the petrol tax and lowering the excise duty in order to boost sales. Finally,

in 1983, the Maruti 800 is released. This 796 cc hatchback is based on the SS80 Suzuki Alto and is India’s first affordable car. Initial product plan is 40% saloons, and 60% Maruti Van. Local production commences in December 1983. In 1984 the Maruti Van, with the same three-cylinder

engine as the 800, is released. Installed capacity of the plant in Gurgaon, reaches 40,000 units.

In 1985 the Suzuki SJ410-based Gypsy, a 970 cc 4WD off-road vehicle, is launched. In 1986 the original 800 is replaced by an all-new model of the 796 cc hatchback Suzuki Alto/Fronte. This is

also when the 100,000th vehicle is produced by the company. In 1987 follows the company's first export to the West, when a lot of 500 cars were sent to Hungary. Maruti products had been

exported to certain neighboring countries already. By 1988, the capacity of the Gurgaon plant is increased to 100,000 units per annum.

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MARKET LIBERALISATION:

In 1989 the Maruti 1000 is presented after having been shown earlier. This 970 cc, three-box is India’s first contemporary sedan. By 1991 65 percent of the components, for all vehicles

produced, are indigenised. Meanwhile, the liberalisation of the Indian economy opens new opportunities but also brings more competition to the segments in which Maruti operates. In

1992 Suzuki increases its stake in Maruti to 50 percent, making the company a 50-50 JV with the Government of India the other stake holder.

A flow of new models begin in the early nineties. In 1993 the Zen, a modern 993 cc, hatchback

which is later exported globally as the Suzuki Alto. In 1994 the 1298 cc Esteem appears, a more luxurious redesigned Maruti 1000. This and other Marutis begin appearing in a plethora of different equipment levels, to better suit India's increasingly discerning consumers. A Zen

Automatic arrives in 1996, as does the Gypsy King, a 1.3 liter version of the compact off-roader, and a minibus version of the Omni (the Omni E).

In 1994 Maruti Suzuki produces its 1 millionth vehicle since the commencement of production,

being the first company in India to do so. This is still not enough in a booming market and the next year Maruti's second plant is opened, with annual capacity reaching 200,000 units. Maruti also launches a 24-hour emergency on-road vehicle service, the first of its kind in the country. In

1996 the United Front government is formed, with Murasoli Maran new Industries Minister. On 27 August the following year the government nominates Mr. S.S.L.N. Bhaskarudu as the

Managing Director, as the then current Managing director R.C. Bhargava, was completing his tenure. This creates a conflict with Suzuki, discussed closer in the Joint venture related issues section.

In 1998 the new Maruti 800 is released, the first change in design since 1986. This is simply a

facelift of the existing model, to ensure steady sales. Also, the two millionth vehicle is produced. Other news included the Zen D, a 1527 cc diesel hatchback and Maruti's first diesel vehicle. The

Omni van and microbus is also redesigned. The next year the Omni bus arrives in a high roof version, the Omni XL. The 1.6 liter Maruti Baleno three-box saloon, advertised as the 'Maruti Suzuki Baleno', also appears. This is Maruti's biggest car yet. Finally, in what is a very busy

year, the Wagon R is launched.

In 2000 Maruti becomes the first car company in India to launch a Call Center for internal and customer services. The new Alto model is also released, somewhat larger and more modern than

the 800. The estate Baleno Altura is also shown, while IDTR (Institute of Driving Training and Research) is launched jointly with the Delhi government to promote safe driving habits. In 2001 Maruti True Value, selling and buying used Maruti Suzukis, is launched in Bangalore and Delhi,

later in Mumbai and elsewhere. In October of the same year the Maruti Versa sees the day, a bigger engined and more luxurious microbus than the Omni. It never catches on in the market

and is discontinued by late 2009, only to be replaced by a cheaper, stripped-down version called Eeco. Customer information centers are also launched in Hyderabad, Bangalore and Chennai. In 2002 the Esteem Diesel appears, as does Maruti Insurance. Two new subsidiaries are also

started: Maruti Insurance Distributor Services and Maruti Insurance Brokers Limited. Suzuki Motor Corporation increases its stake in Maruti to 54.2 percent.

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In 2003 the new Suzuki Grand Vitara XL-7 appears, while the Zen and the Wagon R are upgraded and redesigned. The four millionth Maruti vehicle is built and they enter into a

partnership with the State Bank of India. Maruti Udyog Ltd is listed on BSE and NSE after a public issue, which is oversubscribed tenfold. In 2004 the Alto became India's new bestselling

car, overtaking the Maruti 800 which had been number one for nearly two decades. The five-seater Versa 5-seater, a new variant, is created while the Esteem undergoes cosmetic changes and is re-launched with a price cut. Maruti Udyog closed the financial year 2003-04 with an annual

sale of 472,122 units, the highest ever since the company began operations 20 years earlier, and the fiftieth lakh (5 millionth) car rolls out in April, 2005, with overall sales growing by 15.8%.

The 1.3 L Suzuki Swift five-door hatchback also appears. 2004-05 marked another record year (487,402 domestic sales) and exports reached 48,899 cars to about fifty different countries. The United Kingdom took the lion's share, with 10,623 deliveries.

In 2006 Suzuki and Maruti set up another joint venture, "Maruti Suzuki Automobiles India", to

build two new manufacturing plants, one for vehicles and one for engines. Cleaner cars were also introduced, with several new models meeting the new "Bharat Stage III" standards. In February

2012, Maruti Suzuki sold its ten millionth vehicle in India. For the Month of July 2014, it has a Market share of >45 %.

In August 2014, CCI imposed a fine of around 2,545 crore on 14 auto companies for indulging in

anti-competitive trade agreements. CCI has directed these companies to put in place an effective system for purchasing spare parts. Among the companies fined, Maruti Suzuki was slapped a fine of 471.14 Cr.

On 3 September 2014, the Delhi High Court has stayed the Competition Commission of India’s

penalty on Maruti Suzuki.

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MARKETING STRATEGY OF MARUTI SUZIKI LTD:

In earlier days when the market was dominated by only few brands like Ambassador & Premier

Padmini, Maruti Suzuki India Limited entered the Indian market with different strategy. The strategy of the company was to offer a compact, modern and fuel efficient car. Maruti released its first Maruti 800 car on 14 December 1983 to fulfill the dreams of Indian customers and

became the market leader. Since 1983 till date Maruti Suzuki gradually offered several choices to the consumer. Due to aggressive competitors today Maruti Suzuki believes in Innovative

Marketing Strategies. With the changing needs, wants & requirements of customers and markets, Maruti Suzuki is altering their Brand Positioning, Advertising and Distribution strategy.

BRAND POSITIONING STRATEGY:

Brand Positioning is the most vital concept in a brand‘s strategy. Brand Positioning is also linked with managing a brand‘s meaning. Today several brand of cars are positioning themselves on the

features like Price, Comfort dimensions, Safety, Mileage etc. Currently Maruti Suzuki followed a very effective multi-segmentation strategy to grab the different segments of the market with

different versions of its brands. About brand positioning Mayank Pareek says that, Maruti Suzuki believe in research and before launching a product the Maruti team does an extensive research on the needs of the customer. Maruti try to understand the customer‘s demography and psychology

to position a brand. Also the company follows the suggestions made by existing customers.

PROMOTIONAL STRATEGY:

Every company is it a big or small needs an innovative promotional strategy because promotional campaigns tend to have a huge effect on the reception of the product. Maruti Suzuki

India Ltd has a formidable line-up of vehicles in its stable and has been quite aggressive about promoting each of its automobile brands. With an intention to face with cutthroat competition

and due to declining market shares, in 2000 Maruti Suzuki cut the prices of few models like Wagon R, Omni and Maruti 800 because Maruti knew very well that the Indian consumer is very sensitive about price & this price cut will definitely beneficial for company. In Jan 2002 to

attract the customers, Maruti decided that some of its corporate assets in Delhi including Maruti‘s manufacturing plant and children‘s park should be promoted. With an intention to

promote road safety and efficient driving the company held ‘carnivals’ periodically at IDTR.

In 2003, to attract the customers Maruti Suzuki launched attractive campaign like ―Change Your Life‖. The company also offered vehicle insurance for One rupee only. In this campaign the customers were asked to write down the chassis and engine number of their vehicles on the entry

form and had to answer the question. In this contest the winners were chosen by a draw of lots and were entitled to gifts worth Rs.50 million.

In 2004, Maruti introduced the ‘2599’ offer under which by paying an EMI of Rs. 2599 for

seven years after a down payment of Rs.40000, a consumer could buy a Maruti 800. In 2004 Maruti introduced the ‘Teacher Plus’ scheme, in a tie up with SBI. In this scheme the bank offered reduced rates of interest for teachers who were interested in buying a new car.

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Rural India is a fast emerging as a focus area in the country‘s economy. Maruti knew that there is a great potential in rural markets & in rural markets, the endorsements of opinion makers takes

precedence over an informed objective Judgment. Considering this fact, Maruti Suzuki launched a panchayat scheme for such opinion makers which covers the village Sarpanch, doctors and

teachers in government instititutions, rural bank officers where in an extra discount is given to make a sell. As a part of customer engaging strategy and to attract the potential customers Maruti organized various melas wherein local flavor is added by organizing traditional social activities

like Gramin Mahotsava are conducted round the year. As a part of promotional approach Maruti Suzuki promoted Swift & other brands through sponsoring various live programmes (Dancing

shows) like Dance India Dance.

ADVERTISING STRATEGY:

Advertising is one aspect of brand building. Whenever Maruti launched any brand, it supported that brand with an ad campaign. Maruti‘s advertising campaigns included TVCs, Radio and Print

ads, Point of Sale, Mobile promotions, online marketing, Outdoor promotions. Maruti‘s advertising strategy focused both on building up its corporate image and promoting its cars. Maruti‘s campaigns emphasized different aspects of its cars, including fuel efficiency, looks,

space, etc.

In the late 1990s, Maruti‘s advertising campaigns were handled by Lowe India (later known as Lowe Lintas & Partners, India) and Rediffusion DY&R. While advertising related to Esteem,

Zen and Baleno were handled by Lowe India and the ad campaign of Maruti 800, Gypsy, Omni and Wagon-R were handled by Rediffusion. With an intention to promote the all brands effectively, in 2000 Maruti decided to appoint Capital Advertising. In 2003, Maruti Suzuki came

up with an innovative advertising that became popular for its simplicity and clear message. In this ad one child plays with his toy car & when the father asked him, he replies, ‘Kya karoon

papa petrol khatam hi nahi hota’. This ad depicted the fuel efficiency of Maruti Suzuki.

DISTRIBUTION STRATEGY:

Distribution is an important marketing mix. In earlier days the consumers used to book for a car and wait for more than a year to actually buy it. Also the concept of Show rooms was non-existent. Even worse thing was the state of the after sales service. With an objective to change

this scenario & to offer better service to customers, Maruti took initiative. To gain competitive advantage, Maruti Suzuki developed a unique distribution network. Presently the company has a

sales network of 802 centers in 555 towns and cities, and provides service support to customers at 2740 workshops in over 1335 towns and cities.

The basic objective behind establishing the vast distribution network was to reach the customers

even in remote areas and deliver the products of the company. The company has formed the Dealer territories and the concept of competition amongst these dealers has been brought about. Periodically corporate image campaigns in all dealership are carried out. In 2003, to increase the

competition the company implemented a strategy for its dealers to increase their profitability levels. Special awards were sometimes given by company for sales of special categories. Maruti

Suzuki had given an opportunity to dealers to make more profits from various avenues like used

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car finance and insurance services. In 2001, Maruti started an initiative known as ‗Non Stop Maruti Express Highway‘. As a part of this initiative Maruti developed 255 customer service

outlets along with 21 highway routes by 2001-02. Also with an intention to provide fast service in less time Maruti had offered Express Service Facility. In the year 2008, Maruti had near about

2,500 rural dealer sales executives, among the total 15,000 dealer sales executives.

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CONSUMER BEHAVIOUR:

For any company it is important to know about the needs and requirements of their customers. It

has been found that the most searched car in India is Maruti Suzuki and it sells more than half

the cars in India. Maruti Suzuki also enjoys 70 percent repeat buyer which in tune with its claim

of being consumer friendly.

There are several aspects that consumer look at with varying degree:

1. Price: People look for affordable price. They have their budget that they can spend on a

car. For middle class and lower middle class Indian price is a very important factor.

Maruti has been successful in catering to their needs.

2. Mileage: Consumers look at mileage. In this scenario of rising petrol prices mileage

becomes a very important characteristic. Fuel efficiency of car is demanded by all

categories of buyers.

3. Brand Recognition and Association: Consumer likes to be associated with an

established brands. It gives them a sense of security.

4. Durability and Warranty: A car is not purchased very often. Customers look for

durability.

5. Appearance and Style: Car is status symbol for many customers. It’s a form of

portraying their class and current financial condition. These customers give a lot of

importance on the appearance and style. Relatively young customers look more for style

than old ones.

6. Reliability and Trust: A brand should be associated with trust and reliability, only then

will it be positioned in the minds of the people for a longer time and can succeed in the

market.

7. Availability: With the explosion of choices, products should be easily available

otherwise prospective customers will shift to the competitors. Ease of availability can

also bring competitors customers to our brand if they fail in this category.

8. Resale Value: People like to change cars after certain number of years which depends on

several parameters. New car purchase is often accompanied by exchange of old car.

Hence a high resale value is what customers look for and Maruti provides this.

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MARKETING MIX

The basic elements of marketing mix of a company are the 4 P’s (Product, Price, Place and

Promotion). The 4 P’s of marketing helps in determining the various marketing strategies

adopted by the company.

PRODUCT:

Maruti Suzuki has divided its product line into five segments as per the following table.

Product Line Products

A1 (Mini) 800

A2 (Compact/Hatchback) Alto, Swift, Ritz, Celerio

A3 (Mid-size) Swift DZire, SX4

Utility Vehicle Gypsy, Grand Vitara

Multi-Purpose Vehicle Omni, Eeco

The cars have also been divided into its various variants depending on the type of fuel used.

Some cars have been rolled out for use with both petrol and diesel. With rising prices of petrol,

there is a sharp demand for diesel-run vehicles. Also, Maruti Suzuki has two of its cars with

CNG fitting too. These are vehicles that run on CNG. Examples of CNG run cars are Alto 800,

Eeco, Wagon R, Celerio, Ertiga and SX4. By the year 2015, Maruti Suzuki is planning to launch

an electric car by the name Swift Hybrid, which will be a hatchback car.

PRICE:

The prices of the cars of Maruti Suzuki have generally been set to target the lower middle class

and middle class families in India. Their pricing strategy is based on their continuing vision of

“Putting India on Four Wheels”. Their prices are so designed as to enable people to upgrade

from 2-wheelers to 4-wheelers and already 4-wheeler owners to upgrade to a better 4-wheeler

offered by the company.

In 2007, though the company changed its price strategy as it was being labeled as low-price

small car manufacturer. They launched plans of a new car in the premium car segment, Maruti

Suzuki Kizashi, to remove this label attached to the company’s reputation.

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The following chart shows the various products and their price range of the cars of Maruti

Suzuki Ltd. in India

PLACE:

This is one part of the marketing mix where Maruti Suzuki has an advantage over all of its

competitors due to their presence in the country for the longest time as compared to its rivals.

They enjoy a well distributed and an extensive network of car sale outlets, exclusive showrooms,

authorized service stations, true value outlets. Maruti Suzuki has two state-of-the-art

manufacturing facilities setup in Gurgaon and Manesar to the south of Delhi. The combined

capacity for the two plants is 1.2 million vehicles on an annual basis.

Some numbers showing the extensive network for Maruti Suzuki are:

Showrooms and Car Sale Outlets - 933 covering 668 cities.

Authorised Service Stations – 1845 covering 1395 cities.

Dealership Outlets – 1101

True Value Outlets – 353 covering 208 cities.

Express Service Stations on Highways - 30

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The True Value Outlets were started with a view to retain the customers under exchange

programs enabling the customers to upgrade their existing car models. Later these outlets were

converted to be a different vertical business unit of Maruti Suzuki Ltd. to capture the market for

pre owned cars in India based on the high resale value of Maruti Suzuki cars giving up to 70

percent return on resale.

PROMOTION:

The company has for most of its years of operation targeted the Indian middle class families as

their main consumers. That’s why their promotional strategy has always been to create an

emotional connect with the audience. Maruti Suzuki Ltd. has used various media of promotion.

TV - There has been a lot of advertisements through this media as most of the target

audience connects to Maruti Suzuki through its emotional TV commercials company

touches everyone irrespective of their demographics, age, occupation etc. There is always

an advantage when an connection is made with the audience through audio-visual means

as it is supposed to leave an ever lasting impact on the consumers.

Print Media – The Company has also used newspaper, magazines to promote its product

to the consumers.

Radio – The Company also uses radio as an important media for advertising its product

line. It sponsors certain shows on air, events for all radio listeners etc.

Apart from this, Maruti Suzuki Ltd. has also partnered with certain TV shows like “India’s Got

Talent” and also provides sponsorships to certain famous events to make its presence felt. The

company is also involved in certain CSR activities mostly around its manufacturing units to

make people grow with the company. This all helps in creating a visibility and goodwill for the

company for the non-existing customers and hence, increasing the sales.

There are strategic alliances that Maruti Suzuki Ltd. has entered into with many banks, insurance

firms to provide its customers with financing and insurance products for making the process of

purchase of car easier for them. Maruti Suzuki also provides its customers with a “Auto Card”.

This is a loyalty program introduced by the company to retain the customers and to increase the

company’s brand loyalty. Under this program, every new customer gets initial brownie points

equal to 100 points on purchase of a car. Afterwards, on every purchase of Rs. 100 for any

Maruti Suzuki product (including car-servicing), customers earn 3 points. Moreover, they can

earn 3000 points when they upgrade from one Maruti Suzuki car to another Maruti Suzuki car.

On referrals they can earn up to 1000 points if the referral gets converted into a sale.

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The Company also conducts mega camps where they provide AC and pollution checks,

complimentary car wash to its customers to improve customer relations.

Maruti Suzuki Ltd. also has an extensive CRM program to manage its relationships with

customers. Apart from all this, the company also has various seasonal campaigns to target the

audience like festival times to capture the celebration mood of people and convert it into sales.

Festivals like Navratri, Diwali etc. are times when huge discounts or other gifts are offered by

the company.

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SEGMENTING, TARGETING AND POSITIONING:

SEGMENTING:

Based on the economic strata the Indian automobile consumer segment is divided in five

categories:

Economy (priced less than 3 lakhs)

Mid Range (priced between 3-5 lakhs)

Luxury (priced between 5-10 lakhs)

Premium (priced between 10-20 lakhs)

Super Premium (priced above 20 lakhs)

The economic segment caters to the need of the rural and the semi urban population, whereas the

mid range segment takes care to the needs of all three i.e. rural, semi urban and the urban

population. The luxury segment takes care of the semi urban and the urban population and as

there are no cars of Maruti in the super premium segment so the needs of the affluent class is not

fulfilled.

TARGETING:

Maruti is segmented also on the basis of income groups present in the country i.e. the people

having an income of 3 lakhs per annum consider cars of economy range which are Alto and

Omni. People falling in the income range of 3-5 lakhs per annum consider the mid range

segment of Maruti cars which include A-Star, Swift and Ritz. The people with an income more

than 5 lakhs per annum mainly consider cars in luxury and premium segment of Maruti cars such

as SX4, Swift Dzire etc.

Maruti faces stiff competition from Chevrolet Beat, Tata Indica, Fiat Punto and Hyundai I10 in

the automobile sector. Maruti provides all the basic features which are required in a car by a

customer so it is clearly the market leader in the Indian automobile sector.

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The following table shows us the comparison between the market share of Maruti Suzuki Ltd.

compared with other automobile companies in India.

Jan - June '14 Jan - June '13

Maruti Suzuki 46.27% 43.83%

Hyundai 16.92% 15.60%

Mahindra 9.28% 10.76%

Honda Cars 7.29% 4.02%

Toyota 4.94% 5.98%

Tata Motors 4.86% 5.75%

Ford 3.25% 2.45%

Chevrolet 2.70% 3.71%

Others Combined

(Skoda, VW, Renault,

Nissan, Fiat) 4.49% 7.91%

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POSITIONING:

There are various taglines associated with different Maruti cars which signifies the uniqueness of

each car on its own, like the tagline for Alto was “Let’s Go In An Alto”, for Swift it was “You

Are The Fuel” and for SX4 it was “Men Are Back”. These taglines completely associate all these

cars.

REPOSITIONING:

Since the demand of the Indian consumer has risen and also a stiff competition faced by Maruti

in the car segment has forced Maruti to reposition some of its product and also to discontinue

some products which were not making profits. Omni has been given a major facelift in terms of

interiors and exteriors and the new version called Omni Cargo was launched in the market for the

people who wanted a car to travel and also carry the cargo carried by them.

Wagon- R was perceived as dull boxy car when it was lunched. Then further modifications were

made in engine to increase performance and a facelift in the form of sporty looking grills on the

roof. Now it’s of the most successful models in Maruti. The production of Zen was stopped as

the demand for a product which involved recent technology was required. Hence the new Zen

Estillo was launched into the market.

The most important result of the research of Maruti Suzuki was the innovation of the K- Series

engines. The company’s next generation, K- Series engines employ a plethora of state-of-the-art

technologies to deliver on all these fronts. These engines were said to be leaner, meaner and

thinner than the rest of the engines used by the other companies. These engines were more fuel

efficient and swifter than the engines which Maruti Suzuki earlier used.

PHASING OUT OF CERTAIN MODELS:

Maruti Suzuki’s first sedan Esteem (formerly called Maruti 1000) was phased out slowly due to

availability of other cars with better features at the same price from its competitors stable. It was

soon replaced by Swift Dzire to gain back the lost market share.

The production of Baleno was stopped in 2011 to make way for a new model as part of the

company’s strategy to bring new models to the market.

20

PORTER’S FIVE FORCE MODEL FOR MARUTI SUZUKI LTD.:

Michael Porter identified five forces that determined the long run attractiveness of a business.

The following is the analysis of Porter’s five forces in context of Maruti Suzuki Ltd.

21

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.

THREAT OF SUBSTITUTE: LOW TO MEDIUM

Maruti Suzuki faces threat from consumers 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 in the

future.

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 components

suppliers whose switching cost are very high. Thus reducing the bargaining power of the

suppliers.

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 Volkswagon, Honda, Ford have also given competition to the premium car segment.

BARGAINING POWER OF CONSUMERS: HIGH

Increase in consumer awareness and increasing competition has forced Maruti to either reduce

the prices of its cars or provide extra services to the consumers at the same rate

22

THREE GENERIC STRATEGIES:

To cope up with the five competitive forces there are Three Generic Strategies Maruti Suzuki

Ltd. has applied.

1. To Achieve Cost Leadership: To realize economies of scale capital investment in state-

of-the-art equipment plant is required. Maruti Suzuki has set up two such manufacturing

facilities in India.

Gurgaon Facility (300 acres) housing the ‘K’ engine plant

Manesar Facility (600 acres)

2. Differentiation: Maruti has created a difference in the market by providing the

consumers with quality fuel efficient cars at affordable prices. It has also differentiated

itself from other companies by providing excellent after sale service at various service

centers across the country.

3. Focus: Focus is the moderator between cost leadership and differentiation.

Cost Focus: Maruti has tried to offer a low price product to a small and

specialized group of buyers. This has helped Maruti to cut down prices just hours

before Tata introduced Indica.

Differentiation Focus: Maruti has a niche of premium products available at a

premium price. Maruti Kizashi and Maruti Vitara provides the possibility to

charge a premium price for superior quality.

COST LEADERSHIP

DIFFERENTIATION

FOCUS

23

SWOT ANALYSIS:

STRENGTHS:

1. Bigger name in the market

2. Established distribution and after sales network

3. Understanding of the Indian market

4. Ability to design product with differentiating features

5. Brand image

6. Experience and know-how in technology

7. Trust of people

8. Maruti Suzuki is the market leader for more than a decade

24

9. Has a great dealership chain in the market

10. Better after sale service

11. Low maintenance cost of vehicle

WEAKNESS:

1. Lack of experience in foreign market

2. Comparatively new to electric or hybrid cars

3. People resistant to upper segment models

4. Heavy import tariff on fully built imported models

5. Exports are low

6. Lesser diesel models in the market compared to others

7. Global image not big

OPPURTUNITIES:

1. Increased purchasing power of Indian middle class family

2. Government subsidies

3. Tax benefits

4. Prospective buyers from two wheeler segment

5. Great opportunities to global with success of Swift and SX4

6. Introduction of more diesel models

7. Opportunity to grow bigger by entering into bigger car markets

8. Already a market leader which provides the opportunity to be at the top of the market in

every stage of industry.

25

THREATS:

1. Foreign companies entering market, so a bigger threat from MNCs

2. Competition from second hand cars

3. Threats from Chinese manufacturers

4. Threat to market share as many big names are entering the industry

5. Lower number of diesel models

6. Lower cost competitors like Tata Nano

26

BCG MATRIX:

The BCG (Boston Consulting Group) model is a well known portfolio management tool used in

product life cycle theory. BCG matrix is often used to prioritize which product within the

company’s product mix gets more funding and attention.

The Stars is the scenario where there is the optimum situation of high growth and high share, this

method requires an increased investment due to the continuous growth. Maruti Suzuki Zen and

Swift are in this scenario.

The Cash Cow cycle deals with low growth and high share. This scenario requires a low

investment and growth is also slow. Wagon R and Alto are under this scenario.

The Dogs method is the situation where the growth is low and the market share is low, this is one

of the worst situations. In this situation if the products are not delivering the cash then it is best to

liquidate. Omni and Versa belong to this segment.

The last part of the cycle is the Question Mark which is high market growth but low shares. In

this situation there is a high demand but low returns. It is best to try and increase market share or

get it to deliver cash. SX4 and A Star belong to this scenario.

27

PRODUCT LIFE CYCLE:

INTRODUCTION STAGE:

For cars like Alto K10 and Kizashi market share is slight but marketing costs are high

GROWTH STAGE:

Swift Dzire, Zen Estillo and SX4 are characterized by rapid growth in sales and profit

MATURITY STAGE:

In case of Alto, Wagon R and Swift competition is intense and any significant move is likely to

be copied by competitors.

DECLINE STAGE:

Market for Omni and Gypsy is shrinking, thus reducing the overall profit.

28

RATIO ANALYSIS:

MEANING:-

Absolute figures expressed in financial statements by themselves are meaningfulness. These

figures often do not convey much meaning unless expressed in relation to other figures. Thus, it

can be say that the relationship between two figures, expressed in arithmetical terms is called a

ratio.

TYPES OF RATIOS:-

Proportion or Pure Ratio or Simple ratio.

Rate or so many Times.

Percentage

Fraction.

OBJECTS AND ADVANTAGES OR USES OF RATIO ANALYSIS:-

Ratios are worked out to analyze the following aspects of business organization-

Solvency-

1. Long term

2. Short term

3. Immediate

Stability

Profitability

Operational efficiency

Credit standing

Structural analysis

Effective utilization of resources

Leverage or external financing

LIMITATION OF RATIO ANALYSIS:-

False accounting data gives false ratios

Comparisons not possible of different firms adopt different accounting policies.

Ratio analysis becomes less effective due to price level change

29

Ratios may be misleading in the absence of absolute data.

Limited use of a single Ratio.

Window-Dressing

Lack of proper standards.

Ratio alone are not adequate for proper conclusions

Effect of personal ability and bias of the analyst.

CLASSIFICATION OF RATIOS:-

BASED ON FINANCIAL STATEMENT:-

Accounting ratios express the relationship between figures taken from financial statements.

Figures may be taken from Balance Sheet, P& P A/C, or both. One-way of classification of ratios

is based upon the sources from which are taken.

1] Balance sheet ratio:

If the ratios are based on the figures of balance sheet, they are called Balance Sheet Ratios. E.g.

Ratio of current assets to current liabilities or Debt to equity ratio. While calculating these ratios,

there is no need to refer to the Revenue statement. These ratios study the relationship between

the assets & the liabilities, of the concern. These ratios help to judge the liquidity, solvency &

capital structure of the concern. Balance sheet ratios are Current ratio, Liquid ratio, and

Proprietary ratio, Capital gearing ratio, Debt equity ratio, and Stock working capital ratio.

2] Revenue ratio:

Ratio based on the figures from the revenue statement is called revenue statement ratios. These

ratios study the relationship between the profitability & the sales of the concern. Revenue ratios

are Gross profit ratio, Operating ratio, Expense ratio, Net profit ratio, Net operating profit ratio,

Stock turnover ratio.

30

3] Composite ratio:

These ratios indicate the relationship between two items, of which one is found in the balance

sheet & other in revenue statement.

There are two types of composite ratios-

a) Some composite ratios study the relationship between the profits & the investments of the

concern. E.g. return on capital employed, return on proprietors fund, return on equity capital

etc.

b) Other composite ratios e.g. debtors turnover ratios, creditors turnover ratios, dividend

payout ratios, & debt service ratios.

BASED ON FUNCTION:-

Accounting ratios can also be classified according to their functions in to liquidity ratios,

leverage ratios, activity ratios, profitability ratios & turnover ratios.

1] Liquidity ratios:

It shows the relationship between the current assets & current liabilities of the concern e.g. liquid

ratios & current ratios.

2] Leverage ratios:

It shows the relationship between proprietors funds & debts used in financing the assets of the

concern e.g. capital gearing ratios, debt equity ratios, & Proprietary ratios.

3] Activity ratios:

It shows relationship between the sales & the assets. It is also known as Turnover ratios &

productivity ratios e.g. stock turnover ratios, debtors’ turnover ratios.

31

4] Profitability ratios:

a) It shows the relationship between profits & sales e.g. operating ratios, gross profit ratios,

operating net profit ratios, expenses ratios

b) It shows the relationship between profit & investment e.g. return on investment, return on

equity capital.

5] Coverage ratios:

It shows the relationship between the profit on the one hand & the claims of the outsiders to be

paid out of such profit e.g. dividend payout ratios & debt service ratios.

Based on User:

1] Ratios for short-term creditors: Current ratios, liquid ratios, stock working capital ratios

2] Ratios for the shareholders: Return on proprietors fund, return on equity capital

3] Ratios for management: Return on capital employed, turnover ratios, operating ratios,

expenses ratios

4] Ratios for long-term creditors: Debt equity ratios, return on capital employed, proprietor

ratios.

32

RATIO ANALYSIS OF MARUTI SUZUKI LTD.

PER SHARE RATIOS

Adjusted EPS (Rs.) 92.13

Adjusted Cash EPS (Rs.) 161.13

Reported EPS (Rs.) 92.13

Reported Cash EPS (Rs.) 161.13

Dividend Per Share 12.00

Operating Profit Per Share (Rs.) 168.69

Book Value (Excl Rev Res) Per Share (Rs.) 694.45

Book Value (Incl. Rev Res) Per Share (Rs.) 694.45

Net Operating Income Per Share (Rs.) 1446.66

Free Reserves Per Share (Rs.) 0

PROFITABILITY RATIOS

Operating Margin (%) 11.66

Gross Profit Margin (%) 6.89

Net Profit Margin (%) 6.25

Adjusted Cash Margin (%) 10.93

Adjusted Return On Net Worth (%) 13.26

Reported Return On Net Worth (%) 13.26

Return On long Term Funds (%) 17.88

LEVERAGE RATIOS

Long Term Debt / Equity 0.02

33

Total Debt/Equity 0.08

Owners fund as % of total Source 92.56

Fixed Assets Turnover Ratio 2.05

LIQUIDITY RATIOS

Current Ratio 0.88

Current Ratio (Inc. ST Loans) 0.77

Quick Ratio 0.67

Inventory Turnover Ratio 25.62

PAYOUT RATIOS

Dividend payout Ratio (Net Profit) 13.02

Dividend payout Ratio (Cash Profit) 7.44

Earning Retention Ratio 86.98

Cash Earnings Retention Ratio 92.56

COVERAGE RATIOS

Adjusted Cash Flow Time Total Debt 0.34

Financial Charges Coverage Ratio 33.65

Fin. Charges Cov. Ratio (Post Tax) 28.67

COMPONENT RATIOS

Material Cost Component(% earnings) 72.06

Selling Cost Component 0

Exports as percent of Total Sales 9.47

Import Comp. in Raw Mat. Consumed 9.19

34

Long term assets / Total Assets 0.76

Bonus Component In Equity Capital (%) 0

COMMENTS ON RATIOS:-

Return on Assets stood at 9.7% for FY’14 which is same as of FY’13.

Profit before tax (PBT) was Rs. 36,585 million against Rs. 29,910 million showing an

increase of 22 per cent and Profit after tax (PAT) stood at Rs.27,830 million against Rs.

23,921 million in the previous year showing an increase of 16 per cent.

Consolidated Operating profit margin improved to 11.79% in FY’14 from 9.9% in FY’13

Return on Net worth stood at 13.26% for Mar’14 as against 12.87 for Mar’13

Current ratio has decreased to 0.92 in FY’14 from 1.47 in FY’13.

Inventory Turnover ratio has increased from 25.83 in FY’13 to 30.61 in FY’14

Debtors Turnover ratio has decreased to 33.7 from 43.66 on year on year basis in FY’14

Earnings Per Share was Rs.92.13 in Mar’14 and Rs.79.19 in FY ended Mach’13.

Book Value per Share improved to Rs 694.45 in March’14 as against Rs.615.03 in

March’13.

Book value of Share is consistently increasing over Years .

YEAR ON YEAR COMPARISON OF RATIOS:

1. Asset Turnover Ratio:

35

2. Return on Capital Employed:

3. Current Ratio:

0

2

4

6

8

10

12

14

16

18

March '14 March '13 March '12 March '11 March '10

36

4. Quick Ratio:

5. Dividend Pay Out Ratio:

0

2

4

6

8

10

12

14

16

18

March '14 March '13 March '12 March '11 March '10

0

2

4

6

8

10

12

14

16

18

March '14 March '13 March '12 March '11 March '10

37

CONCLUSION:

Automobile market today is very dynamic & competitive with a range of players and products.

There are many reasons for the impressive growth of the Indian passenger car Industry. Some of

these are easy availability of vehicle finance, attractive rate of interest and convenient

installments. In today‘s cutthroat competition it is very difficult to survive. Stiff competition has

forced manufacturers to be innovative and responsive to customer demands and needs. Maruti

Suzuki India Limited is a leading company in Indian Automobile sector which occupies

prominent place due to its innovative strategic marketing, promotional, Brand positioning,

advertising strategies. In today‘s scenario the success of company lies in structuring and

restructuring the marketing strategies and continuous innovation of product and services.

The Maruti Suzuki has a huge market and has left no stone unturned to satisfy the customers. It

has models in every segment of the automobile market. Maruti Suzuki stands for value as much

as it stands for performance. In spite of rising input costs, the company tries their best to keep

prices down. Their running costs and resale values are unbeatable too. Competitive strategy of

this company facilitated healthy profit and customer satisfaction and its recognition as a

company which stands for environmental concerns.

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BIBLIOGRAPHY:

1. Marketing Strategy of Maruti Suzuki Ltd. - International Journal of Application or

Innovation in Engineering & Management.

2. Annual Report of Maruti Suzuki Ltd.

3. www.marutisuzuki.com

4. www.wikipedia.com

5. www.carwale.com