CASE STUDY TITLE: MARUTI UDYOG LIMITED Managing competition successfully

MARUTI UDYOG LIMITED Managing competition successfully Maruti Udyog Limited (MUL) was established in Feb 1981 through an Act of Parliament, to meet the growing demand of a personal mode of transport caused by the lack of an efficient public transport system. It was established with the ob ecti!es of " moderni#ing the Indian automobile industry, producing fuel efficient !ehicles to conser!e scarce resources and producing indigenous utility cars for the growing needs of the Indian population. A license and a $oint %enture agreement were signed with the &u#uki 'otor (ompany of $apan in )ct 198*, by which &u#uki ac+uired ,-. of the e+uity and agreed to pro!ide the latest technology as well as $apanese management practices. &u#uki was preferred for the oint !enture because of its track record in manufacturing and selling small cars all o!er the world. /here was an option in the agreement to raise &u#uki0s e+uity to 12., which it e3ercised in 1984. Fi!e years later, in 199,, &u#uki further increased its e+uity to 52. turning 'aruti into a non"go!ernment organi#ation managed on the lines of $apanese management practices. 'aruti created history by going into production in a record 1* months. 'aruti is the highest !olume car manufacturer in Asia, outside $apan and 6orea, ha!ing produced o!er 5 million !ehicles by 'ay ,225. 'aruti is one of the most successful automobile oint !entures, and has made profits e!ery year since inception till ,222"21. In ,222"21, although 'aruti generated operating profits on an income of 7s 9,.5 billion, high depreciation on new model launches resulted in a book loss. COMPANY T#e E$o%utio& 'aruti0s history of e!olution can be e3amined in four phases8 two phases during pre"liberali#ation period 9198*"8-, 198-"199,: and two phases during post"liberali#ation period 9199,"94, 1994",22,:, followed by the full pri!ati#ation of 'aruti in $une ,22* with the launch of an initial public offering 9IP):. The first phase started when Maruti rolled out its first car in December 1983. During the initial years Maruti had 883 employees, a capital of Rs. 607 mn and profit of Rs. 17 mn without any tax obligation. From such a modest start the company in just about a decade (beginning of second phase in 1992) had turned itself into an automobile giant capturing about 80% of the market share in India. Employees grew to 2000 (end of first phase 1986), 3900 (end of second phase 1992) and 5700 in 1999. The profit after tax increased from Rs 18.67 mn in 1984 to Rs. 6854.54 mn in 1998 but started declining during 1997-2001. During the pre-liberalization period (1983-1992) a major source of Marutis strength was the wholehearted willingness of the Government of India to subscribe to Suzukis technology and the principles and practices of Japanese management. Large number of Indian managers, supervisors and workers were regularly sent to the Suzuki plants in Japan for training. Batches of Japanese personnel came over to Maruti to train, supervise and manage. Marutis style of management was essentially to follow Japanese management practices. The Path to Success for Maruti was as follows: (a) teamwork and recognition that each employees future growth and prosperity is totally dependent on the companys growth and prosperity (b) strict work discipline for individuals and the organization (c) constant efforts to increase the productivity of labor and capital (d) steady improvements in quality and reduction in costs (e) customer orientation (f) long-term objectives and policies with the confidence to realize the goals (g) respect of law, ethics and human beings. The path to success translated into practices that Marutis culture approximated from the Japanese management practices. Maruti adopted the norm of wearing a uniform of the same color and quality of the fabric for all its employees thus giving an identity. All the employees ate in the same canteen. They commuted in the same buses without any discrimination in seating arrangements. Employees reported early in shifts so that there were no time loss in-between shifts. Attendance approximated around 94-95%. The plant had an open office system and practiced ISTORY AND !AC"GROUND

on-the-job training, quality circles, kaizen activities, teamwork and job- rotation. Near-total transparency was introduced in the decision making process. There were laid-down norms, principles and procedures for group decision making. These practices were unheard of in other Indian organizations but they worked well in Maruti. During the pre- liberalization period the focus was solely on production. Employees were handsomely rewarded with increasing bonus as Maruti produced more and sold more in a sellers market commanding an almost monopoly situation. INDUSTRY ANALYSIS GLO!AL 'OUR ( EELER INDUSTRY E$o%utio& /he automobile industry has undergone significant changes since ;enry Ford first introduced the assembly line techni+ue for the mass production of cars. Production concepts, processes and the associated technologies ha!e changed dramatically since the first cars were built. &ome 42 years ago, car assembly was primarily manual work. /oday, the process of car assembly is almost fully automated. In the old days, firms attached importance to the production of !irtually e!ery part in a single plant, while today, carmakers concentrate on only a few specific production stages 9i.e. car assembly:. Parts and module production, ser!ices and related acti!ities ha!e been shifted to other, specialised firms 9outsourcing of production steps:.&ince the 1982s, it has become clear that further producti!ity gains to retain competiti!eness can be possible only by outsourcing and securing greater fle3ibility. For e3ample, firms, especially small car producers whose markets ha!e been threatened by imports, ha!e di!ersified their production programmes 9e.g. by building off"road cars or con!ertibles: thereby introducing greater fle3ibility in the production process. Also, firms and their production ha!e become more internationali#ed in lieu of outsourcing. Curre&t S)e&ario /he global passenger car industry has been facing the problem of e3cess capacity for +uite some time now. For the year ,22,, the global capacity in the automoti!e industry was 45 million units a year, against production of only 5- million units 9e3cess capacity estimated at ,5.:. <fforts to shore up capacity utili#ation ha!e prompted se!ere price competition, thus affecting margins and forcing fundamental changes in the industry. /he pressure on sales and margins is dri!ing players to emerging markets in pursuit of better growth opportunities and=or access to low"cost manufacturing bases. > /he concept of selling in the passenger car industry is changing from original sales towards lifecycle !alue generation, encompassing financing, repairs ? maintenance, cleaning, pro!ision of accessories, and so on. > %ehicle manufacturers are mo!ing into completely new materials and technologies@partly guided by en!ironmental legislation@in stri!ing to come up with radically different products. &ome of these new technologies in!ol!e parts that can be bolted on to an e3isting !ehicle with relati!ely few implications for the rest of the !ehicle. )thers are much more fundamental, and are likely to ha!e a profound impact throughout the supply chain. /he e3amples include battery, electric or hybrid power trains, and alternati!es to the all"steel body. (armakers are increasingly outsourcing component production, and focusing on product design, brand management and consumer care, in contrast to the traditional emphasis on manufacturing and engineering. > /he increasing need to attain global scales underscores the importance of platform sharing among carmakers. All original e+uipment manufacturers 9)<'s: are trying to reduce the number of !ehicle platforms, but raise the number of models produced from each platform. /his means producing a number of seemingly distinct models from a common platform. > As in manufacturing, distribution in the automobile industry is undergoing significant changes, in!ol!ing Internet use, retailer consolidation, and unbundling of ser!ices pro!ided by retailers. INDIAN 'OUR ( EELER INDUSTRY E$o%utio&

/he Indian automobile industry de!eloped within the broader conte3t of import substitution during the 1952s. /he distincti!e feature of the automobile industry in India was that in line with the o!erall policy of &tate inter!ention in the economy, !ehicle production was closely regulated by an industrial licensing system till the early 1982s that controlled output, models and prices. /he cars were built mostly by two companies, Premier Automobiles Aimited and ;'. ;owe!er, the Indian market got transformed after 198* following the rela3ation of the licensing policy and the entry of 'BA into the car market. In 1991, car imports were insignificant, while component imports were e+ui!alent to ,2. of the domestic production, largely because of the continuing import of parts by 'BA. /he liberali#ation of the Indian automoti!e industry that began in the early 1992s was directed at dismantling the system of controls o!er in!estment and production, rather than at promoting foreign trade. 'ultinational companies were allowed to in!est in the assembly sector for the first time, and car production was no longer constrained by the licensing system. ;owe!er, C7s on built"up !ehicles remained and foreign assemblers were obliged to meet local content re+uirements e!en as e3port targets were agreed with the Do!ernment to maintain foreign e3change neutrality. /he new policy regime and large potential demand led to inflows of foreign direct in!estment 9FEI: by the mid"1992s. Fy the end of 1994, Eaewoo, Ford India, D', Eaimler(hrysler and Peugeot had started assembly operations in India. /hey were followed by ;onda, ;'IA, and 'itsubishi. Curre&t S)e&ario Ma*or P%ayer+ Fa a /empo Aimited, Eaimler(hrysler India Pri!ate Aimited, Fiat India Automoti!e Pri!ate Aimited, Ford India Aimited, Deneral 'otors India Aimited, ;industan 'otors Aimited, ;onda &iel (ars India Aimited, ;yundai 'otor India Aimited, 'ahindra ? 'ahindra Aimited, 'aruti Bdyog Aimited, &koda Auto India Aimited, /ata 'otors Aimited, /oyota 6irloskar 'otors Aimited.
&)B(<8 I(7A ,221

Curre&t +)e&ario i& Pa++e&ger Car Category /he dominant basis of competition in the Indian passenger car industry has changed from price to price" !alue, especially in the passenger car segment. Ghile the Indian market remains price sensiti!e, the stranglehold of <conomy models has been slackening, gi!ing way to higher"priced products that better meet customer needs. Additionally, a dominant trend in the Indian passenger car segment is the increasing fragmentation of the market into sub" segments, reflecting the increasing sophistication of the Indian consumer. Gith the launch of new models from FH,222 onwards, the market for 'B%s has been redefined in India, especially at the upper"end. (urrently, the higher"end 'B%s, commonly known as &ports Btility %ehicles 9&B%s:, occupy a niche in the urban market, ha!ing successfully shaken off the tag of commercial !ehicles attached to all 'B%s till recently. Eomestic car manufacturers are now !enturing into areas such as car financing, leasing and fleet management, and used"car reconditioning=sales, to complement their mainstay"business of selling new cars.

COMPETITI,E 'ORCES IN INDIAN PASSENGER CAR MAR"ET

Criti)a% I++ue+ a&d 'uture Tre&d+ /he critical issue facing the Indian passenger car industry is the attainment of break"e!en !olumes. /his is related to the +uantum of in!estments made by the players in capacity creation and the selling price of the car. /he amount of in!estment in capacities by passenger car manufacturers in turn depends on the production

T#reat -rom t#e &e. /%ayer+: I&)rea+i&g 'ost of the ma or global players are present in the Indian marketI few more are e3pected to enter. Financial strength assumes importance as high are re+uired for building capacity and maintaining ade+uacy of working capital. Access to distribution network is important. Aower tariffs in post G/) may e3pose Indian companies to threat of imports. Mar0et +tre&gt# o- )o&+umer+: I&)rea+i&g Increased awareness among consumers has increased e3pectations. /hus the ability to inno!ate is critical. Product differentiation !ia new features, impro!ed performance and after"sales support is critical. Increased competiti!e intensity has limited the pricing power of manufacturers.

Mar0et +tre&gt# o+u//%ier+: Lo. A large number of automoti!e components suppliers. Automoti!e players are rationali#ing their !endor base to achie!e consistency in +uality.

Ri$a%ry .it#i& t#e i&du+try: ig# /here is keen competition in select segments. 9compact and mid si#e segments:. Jew multinational players may enter the market.

T#reat -rom +u1+titute+: Lo. to medium Gith consumer preferences changing, inter product substitution is taking place 9'ini cars are being replaced by compact or mid si#ed cars:. strategies of the car manufacturers. &etting up integrated manufacturing facilities may re+uire higher capital in!estments than establishing assembly facilities for semi knocked down kits or complete knocked down kits. In recent years, e!en though the ratio of sales to capacity 9an important indicator of the ability to reach break" e!en !olumes: of the domestic car manufacturers ha!e impro!ed, it is still low for +uite a few car manufacturers in India. India is also likely to increasingly ser!e as the sourcing base for global automoti!e companies, and automoti!e e3ports are likely to gain increasing importance o!er the medium term. ;owe!er, the growth rates are likely to !ary across segments. Although the 'ini segment is e3pected to sustain !olumes, it is likely to continue losing market shareI growth in the medium term is e3pected to be led largely by the (ompact and 'id"range segments. Additionally, in terms of engine capacity, the Indian passenger car market is mo!ing towards cars of higher capacity. /his apart, competition is likely to intensify in the &B% segment in India following the launch of new models at competiti!e prices.

COMPETITOR ANALYSIS YUNDAI MOTOR INDIA LIMITED ;yundai 'otor India Aimited 9;'IA: is a wholly owned subsidiary of ;yundai 'otor (ompany, &outh 6orea and is the second largest and the fastest growing car manufacturer in India . ;'IA presently markets o!er ,5 !ariants of passenger cars in si3 segments. /he &antro in the F segment, and Det# in the FK segment. YUNDAI SANTRO Ge are mainly going to concentrate on the !arious marketing and positioning strategies of ;yundai &antro as against that of 'aruti Len and Alto and ;yundai Det# as against 'aruti &wift. POSITIONING O' SANTRO /he old positioning of the &antro was that pf a Mfamily car0, this positioning strategy was changed in around ,22, and &antro was repositioned as to that of Ma smart car for young people.0 /he target age group for the car had now shifted from *2"*5 years to ,5"*2 years. /he repositioning followed the face"lifts the car has been getting from time to time in the form of engine upgradation, new power steering, automatic transmission, etc, to keep the e3citement around it ali!e in the highly competiti!e small car market. /he repositioning also comes ahead of the possible launch of a new design &antro, and the super F"segment car MDet#0, sometime in ,22*. /he &antro was gi!en a fresh new positioning @ from a 2)om/%ete -ami%y )ar3 to a 2+u&+#i&e )ar3 denoting a fresh new attitude and a Mchanging your life0 positioning.As the a!erage age of a car owner has declined from around *2"*5 three years ago to ,5"*2, primarily because of changing lifestyles, cheap and easily a!ailable finance, etc. the company thought that instead of promoting the &antro as a family car, it should be promoted as a car that can change the life of a young person since many of the buyers were young buyers. YUNDAI3S PRICING STRATEGY Gith the launch of 'aruti &wift recently a price war was e3pected to kick in . Immediately after maruti raised prices on its debutante ;yundai 'otor India hit back with a 7s 1-,222"19,222 markdown on three new !ariants of &antro Ning. /he company has introduced the N6 and NA !ariants at a lower tag of 7s *,,-,999 and 7s .*,15,999 respecti!ely./he new price !ariants are likely to gi!e 'aruti0s e3isting F"segment models, Len and Gagon7 a run for their money. ;yundai has also launched a new non"A( !ariant of the &antro at 7s ,.49 lakh, a tad higher than what the e3isting non"Ac &antro costs. /he ne3t offensi!e is due from 'aruti. Gith the &antro0s new price positioning, Len and particularly Gagon7 may be due for a correction, or at least a limited"period sub!ention. If that happens the domino effect will kick in across the F"segment. ;yundai is positioning its new !ariants on the tech platform. &trapped with 1.1 litre engine with e7AN Acti!e Intelligence technology, the new !ariants also come with new colour"coordinated interiors, a new front grill and a 1"speed A( blower that makes the air conditioning more efficient. TATA MOTORS <stablished in 1915, /ata 'otors is IndiaOs largest and only fully integrated automobile company. /ata 'otors began manufacturing commercial !ehicles in 1951 with a 15"year collaboration agreement with Eaimler Fen# of Dermany. TATA INDICA 4 Tata motor+ -%ag+#i/ 1ra&d /he companyOs passenger car range comprises the hatchback Indica, the Indigo sedan and the 'arina, its station wagon !ariant, in petrol and diesel !ersions./he /ata Indica, IndiaOs first indigenously designed and manufactured car, was launched by /ata 'otors in 1999 as part of its ongoing effort towards gi!ing India transport solutions that were designed for Indian conditions. (urrently, the companyOs passenger cars and multi"utility !ehicles ha!e a 1-"per cent market share.

POSITIONING O' INDICA /ata has positioned Indica as 5more )ar /er )ar6. /he new car offers more space, more style, more power and more options. <mphasi#ing the deli!ery of world class +uality. /hey ha!e tried to redefine the small car market as it has been understood in India./rue to its P'ore car per carP positioning, the Indica (JD offers all the core benefits of the Indica combined with the ad!antage of (JD. )ne of the most popular ad!ertisements on tele!ision currently, is the one where the guy portrayed as the Mlo!eable liar0, gets socked e!erytime he lies I but not when he speaks about the Indica thus implying" Q must be trueR. <laborating on the campaign, the new ad was launched with the intention of gi!ing the Indica %, brand a touch of youthfulness. TATA3S PRICING STRATEGY After the price war being triggered off by ;yundai being the first company to introduce what came to be known as, pricing based on customerOs !alue perceptions , all others followed suit./elcoOs Indica came in the range of 7s ,.5- lakh to 7s *.88 lakh with 1 models. /he price"points in the car market were replaced by price" bands. /he width of a price"band was a function of the si#e of the segment being targeted besides the intensity of competition. /he thumb rule being Othe higher the intensity, the wider the price"band.O KEY STRATEGIC INITIATIVES BY MARUTI A) TURNAROUND STRATEGIES MARUTI FOLLOWED Maruti was the undisputed leader in the automobile utility-car segment sector, controlling about 84% of the market till 1998. With increasing competition from local players like Telco, Hindustan Motors, Mahindra & Mahindra and foreign players like Daewoo, PAL, Toyota, Ford, Mitsubishi, GM, the whole auto industry structure in India has changed in the last seven years and resulted in the declining profits and market share for Maruti. At the same time the Indian government permitted foreign car producers to invest in the automobile sector and hold majority stakes. In the wake of its diminishing profits and loss of market share, Maruti initiated strategic responses to cope with Indias liberalization process and began to redesign itself to face competition in the Indian market. Consultancy firms such as AT Kearney & McKinsey, together with an internationally reputed OD consultant, Dr. Athreya, have been consulted on modes of strategy and organization development during the redesign process. The redesign process saw Maruti complete a Rs. 4000 mn expansion project which increased the total production capacity to over 3,70,000 vehicles per annum. Maruti executed a plan to launch new models for different segments of the market. In its redesign plan, Maruti, launches a new model every year, reduce production costs by achieving 85-90% indigenization for new models, revamp marketing by increasing the dealer network from 150 to 300 and focus on bulk institutional sales, bring down number of vendors and introduce competitive bidding. Together with the redesign plan, there has been a shift in business focus of Maruti. When Maruti commanded the largest market share, business focus was to sell what we produce. The earlier focus of the whole organization was "production, production and production" but now the focus has shifted to "marketing and customer focus". This can be observed from the changes in mission statement of the organization: 1984: "Fuel efficient vehicle with latest technology". 1987: "Leader in domestic market and be among global players in the overseas market". 1997: "Creating customer delight and shareholders wealth". Focus on customer care has become a key element for Maruti. Increasing Maruti service stations with the scope of one Maruti service station every 25 km on a highway. To increase its market share, Maruti launched

new car models, concentrated on marketing and institutional sales. Institutional sales, which currently contributes to 7-8% of Marutis total sales. Cost reduction and increasing operating efficiency were another redesign variable. Cost reduction is being achieved by reaching an indigenization level of 85-90 percent for all the models. This would save foreign currency and also stabilize prices that fluctuate with exchange rates. However, change in the mindset was not as fast as required by the market. Maruti planned to reduce costs, increase productivity, quality and upgrade its technology (Euro I&II, MPFI). In addition, it followed a high volume production of about 400,000 vehicles / year, which entailed a smooth relationship between the workers and the managers. Post 1999, the market structure changed drastically. Just before this change, Maruti had wasted two crucial years (1996-1998) due to governmental interventions and negotiation with Suzuki of Japan about the break-up of the share holding pattern of the company. There was a change in leadership, Mr. Sato of Suzuki became the Chairman in June 1998, and the new Mr.J. Khatter was appointed as the new Joint MD. Khatter was a believer in consensus decision making and participative style of management.As a result of the internal turmoil and the changes in the external environment, Maruti faced a depleting market share, reducing profits, and increase in inventory levels, which it had not faced in the last 18 years. After their fall in market share they redesigned their strategies and through their parent company Suzuki they learned a lot.The organizational learning of Maruti was moderately successful, the cost was relatively inexpensive as Maruti had its strong Japanese practices to fall back upon. With the program of organizational redesign, rationalization of cost and enhanced productivity, Maruti bounced back to competition with 50.8% market share and 40% rise in profit for the FY2002-2003. B) CURRENT STRATEGIES FOLLOWED BY MUL I7 PRICING STRATEGY 8 CATERING TO ALL SEGMENTS

'aruti caters to all segment and has a product offering at all price points. It has a car priced at 7s.1,84,222.22 which is the lowest offer on road. 'aruti gets 42. business from repeat buyers who earlier had owned a 'aruti car. /heir pricing strategy is to pro!ide an option to e!ery customer looking for up gradation in his car. /heir sole moti!e of ha!ing so many product offering is to be in the consideration set of e!ery passenger car customer in India. ;ere is how e!ery price point is co!ered.
S%7No7 1 , !RAND GRAND ,ITARA MARUTI !ALENO ,ARIANTS NA4 ANi %Ni AN %N EN EN, ANi %Ni LNi AN ANi PRICE IN DEL I (R+7) 1-,94,222.22 5,4,,222.22 -,1,,222.22 1,--,222.22 5,*9,222.22 1,19,222.22 1,58,222.22 *,95,222.22 1,25,222.22 1,85,222.22 *,*5,222.22 *,-,,222.22

MARUTI ESTEEM

MARUTI ,ERSA

MARUTI S(I'T

MARUTI (AGON8R

MARUTI GYPSY

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1,-*,222.22 *,84,222.22 1,,2,222.22 5,2-,222.22 5,,9,222.22 *,58,222.22 *,11,222.22 *,-8,222.22 *,9*,222.22 ,,25,222.22 1,8*,222.22 ,,,4,222.22 ,,,1,222.22 ,,19,222.22 ,,*1,222.22 ,,*8,222.22 ,,41,222.22 ,,91,222.22 ,,11,222.22 ,,*4,222.22

MARUTI 9EN

E AN ANi %Ni (A7D) (A7D) APD 5 &<A/<7 8 &<A/<7 NA 5 &<A/<7 NA 8 &<A/<7 &/AJEA7E AN ANi &/E. 'PFI A=( 'PFI

MARUTI OMNI

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MARUTI ALTO MARUTI ALTO

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II7 O''ERING ONE STOP S OP TO CUSTOMERS OR CREATING DI''ERENT RE,ENUE STREAMS 'aruti has successfully de!eloped different re!enue streams without making huge in!estments in the form of 'E&, J,J, 'aruti Insurance and 'aruti Finance. /hese help them in making the customer e3perience hassle free and helps building customer satisfaction. Maruti 'i&a&)e: In a market where more than 82. of cars are financed, 'aruti has strategically entered into this and has successfully created a re!enue stream for 'aruti. /his has been found to be a ma or dri!er in con!erting a 'aruti car sale in certain cases. Finance is one of the ma or decision dri!ers in car purchase. 'aruti has tied up with 8 finance companies to form a consortium. /his consortium comprises (iticorp 'aruti, 'aruti (ountrywide, I(I(I Fank, ;EF( Fank, 6otak 'ahindra, &undaram Finance, Fank of Pun ab and IndusInd Fank Atd.9 erstwhile"Ashok Aeyland Finance:. Maruti I&+ura&)e : Insurance being a ma or concern of car owners. 'aruti has brought all car insurance needs under one roof. 'aruti has tied up with Jational Insurance (ompany, Fa a Allian#, Jew India Assurance and 7oyal &undaram to bring this ser!ice for its customers. From identifying the most suitable car co!erage to !irtually hassle"free claim assistance itOs your dealer who takes care of e!erything. 'aruti Insurance is a hassle" free way for customers to ha!e their cars repaired and claims processed at any 'aruti dealer workshop in India. True ,a%ue 4 I&itiati$e to )a/ture u+ed )ar mar0et Another significant de!elopment is 'BAOs entry into the used car market in ,221, allowing customers to bring their !ehicle to a O'aruti /rue %alueO outlet and e3change it for a new car, by paying the difference. /hey are offered loyalty discounts in return./his helps them retain the customer. Gith 'aruti /rue %alue customer has a trusted name to entrust in a highly unorgani#ed market and where cheating is rampant and the biggest concern

in biggest dri!er of sale is trust. 'aruti knows its strength in Indian market and has filled this gap of pro!iding trust in Indian used car market. 'aruti has created a system where dealers pick up used cars, recondition them, gi!e them a fresh warranty, and sell them again. All in!estments for /rue %alue are made by dealers. 'aruti has build up a strong network of 14, showrooms across the nation. /he used car market has a huge potential in India. /he used car market in de!eloped markets was ,"* times as large as the new car market. N<N: (ar maintenance is a time"consuming process, especially if you own a fleet. 'aruti0s J,J Fleet 'anagement &olutions for companies, takes care of the A"L of automobile problems. &er!ices include end"to" end backups=solutions across the !ehicle0s life8 Aeasing, 'aintenance, (on!enience ser!ices and 7emarketing. Maruti Dri$i&g S)#oo% (MDS): 'aruti has established this with the goal to capture the market where there is inhibition in buying cars due to inability to dri!e the car. /his brings that customer to 'aruti showroom and 'aruti ends up creating a customer. III7 REPOSITIONING O' MARUTI PRODUCTS Ghene!er a brand has grown old or its sales start dipping 'aruti makes some facelifts in the models. )ther changes ha!e been made from time to time based on market responses or consumer feedbacks or the competitor mo!es. ;ere are the certain changes obser!ed in different models of 'aruti. Om&i has been gi!en a ma or facelift in terms of interiors and e3teriors two months back. A new !ariant called )mni (argo, which has been positioned as a !ehicle for transporting cargo and meant for small traders. It has recei!ed a !ery good response from market. A !ariant with APD is recei!ing a !ery good response from customers who look for low cost of running. ,er+a prices ha!e been slashed and right now the lowest !ariant starts at *.* lacs. /hey decreased the engine power from 1-22cc to 1*22cc and modified it again considering consumers perception. /his was a result of intensi!e sur!ey done all across the nation regarding the consumer perception of %ersa. E+teem has gone through three facelifts. A new look last year has helped boost up the waning sales of <steem. !a%e&o was launched in 1999 at 4., lacs. In ,22, they slashed prices to -.1 lacs. In ,22* they launched a lower !ariant as Faleno ANi at 5.1- lacs. /his was to reduce the price and attract customers. (ago&8R was percei!ed as dull bo3y car when it was launched. /his made it a big failure on launch. /hen further modifications in engine to increase performance and a facelift in the form of sporty looking grills on the roof. Jow it0s of the most successful models in 'aruti stable. 9e& has been modified four times till date. /hey had come up with a limited period !ariant called Len (lassic. /hat was limited period offer to boost short term sales. Maruti :;; has so far been facelifted two times. )nce it came with 'PFi technology and other time it came up with changes in front grill, head light, rear lights and with round cur!es all around. I,7 CUSTOMER CENTRIC APPROAC 'aruti0s customer centricity is !ery much e3emplified by the fi!e times consecuti!e wins at $ E Power (&I Awards. Focus on customer satisfaction is what 'aruti li!es with. 'aruti has successfully shed off the public" sector laid back attitude image and has inculcated the customer"friendly approach in its organi#ation culture. /he customer centric attitude is imbibed in its employees. 'aruti dealers and employees are answerable to

e!en a single customer complain. /here are instances of cancellation of dealerships based on customer feedback. 'aruti has taken a number of initiati!es to ser!e customer well. /hey ha!e e!en changed their showroom layout so that customer has to walk minimum in the showroom and there are norms for ser!ice times and deli!ery of !ehicles. /he Eealer &ales <3ecuti!e, who is the first interaction medium with the 'aruti customer when the customer walks in 'aruti showroom, is trained on greeting eti+uettes. 'aruti has proper customer complain handling cell under the (7' department. /he 'aruti call center is another effort which brings 'aruti closer to its customer. /heir 'arket 7esearch department remains on its toes to study the changing consumer beha!iour and market needs.'aruti en oys se!enty percent repeat buyers which further bolsters their claim of being customer friendly. 'aruti is in!esting a lot of money and effort in building customer loyalty programmes. ,7 COMMITTED TO MOTORI9ING INDIA 'aruti is committed to motori#ing India. 'aruti is right now working towards making things simple for Indian consumers to upgrade from two"wheelers to the car. /owards this end, 'aruti partnerships with &tate Fank of India and its Associate Fanks took organi#ed finance to small towns to enable people to buy 'aruti cars. 7s. ,599 scheme was one of the outcomes of this effort. 'aruti e3pects the compact cars, which currently constitute around 82. of the market, to be the engine of growth in the future. 7obust economic growth, fa!orable regulatory framework, affordable finance and impro!ements in infrastructure fa!or growth of the passenger !ehicles segment. /he low penetration le!els at 4 per thousand and rising income le!els will augur well for the auto industry. 'aruti is busy fine"tuning another inno!ation. Ghile researching they found that rural people had strange notions about a car " that the <'I 9e+uated monthly instalments: would range between 7s 1,222 and 7s 5,222. /hat, plus another 7s 1,522",,222 for monthly maintenance, another 7s 1,222 for fuel 9would be the cost of using the car:. /o counter that apprehension, the company is working on a no!el idea. (ontrol o!er the fuel bill is in the consumerOs hands. Fut, maintenance need not be. &ays 6hattar8 PGhat the company is doing now is saying how much you spend on fuel is in your hands anyway. As far as the maintenance cost is concerned, if you want it that way, we will charge a little e3tra in the <'I and offer free maintenance.P ,I7 DISIN,ESTMENT AND IPO O' MARUTI UDYOG LIMITED It was a long and tough ourney, but a rewarding one at the end. A reward worth 7s ,,1,1 crore, making it the biggest pri!ati#ation in India till date. /he si#e of 'aruti0s sell" off deal is proof of its success. )n the in!estment of 7s -- crore it made in 198,, when 'aruti Bdyog Aimited 9'BA: was formally set up, the sale represents a staggering return of *5 times /he best part of the deal is the 7s 1,222 crore control premium the Do!ernment has been able to e3tract from &u#uki 'otor (orporation for relin+uishing its hold o!er India0s largest car company. Jow looking at the strategy point of it S for &u#uki, of course, complete control of 'BA means a lot. 'aruti is its most profitable and the largest car company outside $apan. &u#uki will now be in the dri!er0s seat and will not ha!e to mind the whims and fancies of ministers and bureaucrats. QEecisions will now become +uicker. /he response to changing market conditions and technological needs will be faster,R says $agdish 6hattar, managing director, 'BA. After the disin!estment &u#uki became the decision maker at 'BA. /hey flowed fund in India for the ma or re!amp in 'BA. Cuoting from the report that appeared in /he <conomic /imes, 1th April ,225, " /he Indian car giant 'aruti Bdyog Aimited has finali#ed its two mega in!estment plans @ a new car plant and an engine and transmission manufacturing plant. Foth the pro ects will be implemented by two different companies. At its meeting the companyOs board appro!ed a total in!estment of 7s*,,41.9 crore for these two !entures, which will be located in ;aryana.

/he abo!e signifies when D)I was a ma or stakeholder in the 'BA strategies which lead to in!estment ha!e had a bureaucracy factor in it but after the disin!estment strategy followed is a /)P E)GJ approach with a fast implementation. &u#ukiOs proposed two"wheeler facility in India, would start making motorcycles and scooters by the end of ,225 through a oint !enture, in which 'aruti has 51 per cent stake. /he two"wheeler unit will ha!e a capacity of ,52,222 units a year. /he disin!estment followed by IP) gi!es the insight in the fact that now all the strategic decisions are taken by 'aruti &u#uki (orporation. Eisin!estment had helped by remo!ing the red tape and bureaucracy factor from its strategic decision making process. ,II7 REALISATION O' IMPORTANCE O' ,E ICLE MAINTENANCE SER,ICES MAR"ET In the old days, the companyOs operations could be boiled down to a simple three"bo3 flowchart. (omponents came from the O!endorsO to the OfactoryO where they were assembled and then sent out to the OdealersO. In this scheme, you know where the companyOs re!enues come from. /he new scheme is more complicated. It re!ol!es around the total lifetime !alue of a car. Gork on this began in 1999, when a 'BA team, wondering about new re!enue streams, tra!eled across the world. &ays 7.&. 6alsi, general manager 9new business:, 'BA8 PGhile car companies were mo!ing from products to ser!ices, trying to capture more of the total lifetime !alue of a car, 'BA was ust making and selling cars.P If a buyer spends 7s 122 on a car during its entire life, one"third of that is spent on its purchase. Another third went into fuel. And the final third went into maintenance. <arlier, 'aruti was getting only the first one"third of the o!erall stream. As the Indian market matured, customers began to change cars faster. &ays 6alsi8 P&o the +uestion was, if a car is going to see three users in, say, a life span of 12 years, how can I make sure that it comes back to me each time it changes hands T &o 'aruti has changed gears to take a big share of this final one"third spent on maintenance. 'aintenance market has a huge market potential. <!en after ha!ing fifty lakh !ehicles on road 'aruti is only catering to appro3imately ,2222 !ehicles through its ser!ice stations e!eryday. For this they are conducting free ser!ice workshops to encourage consumers to come to their ser!ice stations. 'aruti has increased its authori#ed ser!ice stations to 15-4 across 12*- cities. <!ery regional office is ha!ing a separate ser!ices and maintenance department which look after the growth of this re!enue stream. ,III7 PLAYING ON COST LEADERS IP 'aruti is the price dictator in Indian automobile industry. It0s the low cost pro!ider of car. /he lowest car on road is from 'aruti stable i.e. 'aruti 822. 'aruti achie!es this through continuous impro!ements in operational efficiency and producti!ity. /he company has set itself 9and its !endors: the target of a 52. impro!ement in producti!ity and a *2. reduction in costs in three years. /he ability to keep lowering the prices sets 'aruti apart from other players in the league. 'aruti spread the o!erheads o!er a larger base. /he impressi!e sales and profits were the result of ma or efforts within the company. 'aruti also increased focus on !endor management. 'aruti consolidated its !endor base. /his has pro!ided its !endors with higher !olumes and higher efficiencies. 'aruti does that by working with !endors, assuring them that for e!ery drop in price, !olumes will go up. 'aruti is now encouraging its !endors to de!elop 7?E capability for speciali#ed components. Fased upon such acti!ities, product competiti!eness in the market will further increase.

'aruti also made strides in applying I/ to manufacturing. A new %ehicle /racking &ystem impro!ed efficiency on the shop floor and enhanced +uality control. /he e Jagare system, adopted from &u#uki 'otor (orporation, smoothened 'aruti0s $ust In /ime operations. C) MAJOR FUTURE STRATEGIES I7 P ASING OUT 9EN IN <;;= /he launch of &wift and phasing out Len is a strategic mo!e. Alto was launched keeping in mind that it will take o!er 'aruti 822 market in future. Perhaps being the flagship product phasing out of 'aruti 822 faced lots of resistance from dealers all o!er. Another reason behind not phasing out 'aruti 822 was the fear of brand shift of customers to other competitor0s product. &wift was launched in 'ay, ,225 in the price band starting from 1 lacs. Fefore launch of &wift 'aruti management had decided that they will phase out Len since it had already came up with two modifications. /he ma or reason behind this decision was cannibali#ation of Gagon 7 and &wift due to o!erlapping of price band. It is a rational decision to kill a product before it starts facing the decline stage in product cycle. 'aruti is offering 7s. *222.22 more margins to dealer on the sale of Gagon"7 as compared to Len. /his is to let dealer push Gagon 7 instead of Len. II7 MARUTI PLANS 'OR A !IG DIESEL 'ORAY /he new car manufacturing company, called 'aruti &u#uki Automobiles India Aimited, will be a oint !enture between 'aruti Bdyog and &u#uki 'otor (orporation holding a 42 per cent and *2 per cent stake respecti!ely. /he 7s1,5,1., crore plant will ha!e a capacity to roll out 1 lakh cars per year with a capacity to scale up to ,.5 lakh units per annum. /he new car manufacturing plant will begin commercial production by the end of ,22-. 'aruti would set up a diesel engine plant at Durgaon in line with its plan to become a ma or player in diesel !ehicles in a couple of years. /his has been done in the wake of ma or competition from /ata Indica and meets the growing demand of diesel cars in India. Ghile the annual growth in the diesel segment was 1* per cent in the last three years, it was 19",2 per cent in the first +uarter 9April"$une: of the current fiscal. 'aruti has currently an insignificant presence in diesel !ehicle. It will manufacture new generation (7EI 9common rail direct in ection: engines in collaboration with Fiat"D' )pel and engines will be of 1,22 cc. /he plant with a capacity to produce one lakh diesel engines would be operational in ,22-. At present, Peugeot of France, supplies diesel engines for 'arutiOs Len and mid"si#ed <steem models. /his will further reduce the imported component in 'aruti !ehicles, making them more competiti!e in the Indian market. III7 MARUTI PLANS 'OR A NE( ENGINE AND TRANSMISSION PLANT /he engine and the transmission plant will be owned by &u#uki Powertrain India Aimited in which &u#uki 'otor (orporation would hold 51 per cent stake and 'aruti Bdyog holding the balance. /he ultimate total plant capacity would be three lakh diesel engines. ;owe!er, the initial production would be 1 lakh diesel engines, ,2,222 petrol engines and 1.1 lakh transmission assemblies. In!estment in this facility will be 7s.1,414.4 crore. /he commercial production will start by the end of ,22-. I,7 INDIA AS E>PORT U! 'OR MARUTI

/hree years back as an e3periment, based on the increasing design capabilities of suppliers in countries like India, 'c6insey did an e3ercise to figure out ust how much money could be sa!ed if automobiles were to be made in o!erseas locations like India, 'e3ico and &outh Africa "" an automobile FP), so to speak. /he result was staggering8 the industry stands to gain U 152 billion annually in cost sa!ings, and an additional U 142 billion annually in new re!enues once demand shoots up following the drop in prices, and the combination of which means a ,5 per cent increase in e3isting re!enue le!els.

According to the study, o!er 92 per cent of automobiles today are sold in the countries they are made in, so thereOs a lot of money to be made by shifting the production o!erseas. /ill recently, ust 122,222 cars produced in low"cost countries were e3ported to high"cost ones "" presumably this figure is going up now that Altos from 'aruti, &antros from ;yundai, Indicas from /ata 'otors, and Ikons from Ford, among others, are being regularly e3ported out of India. Het, as 'c6insey points out, since it ust costs U 522 and ust three weeks 9and both figures are falling: to ship out a car to anywhere in the world, why produce cars in high"wage islandsT If a car was produced in India instead of in $apan, the study says, it will cost ,,",* per cent less, after factoring in higher import duties for components=steel, lower le!els of automation, and transport costs. In August, ,22* 'aruti crossed a milestone of e3porting *22,222 !ehicles since its first e3port in 198-. <urope is the largest destination of 'aruti0s e3ports and coincidentally after the first commercial shipment of 182 units to ;ungary in 1984, the *22,22 mark was crossed by the shipment of 541 units to the same country. /he top ten destination of the cumulati!e e3ports ha!e been Jetherlands, Italy, Dermany, (hile, B.6., ;ungary, Jepal, Dreece, France and Poland in that order. /he Alto, which meets the <uro"* norms, has been !ery popular in <urope where a landmark ,22,222 !ehicle were e3ported till 'arch ,22*. <!en in the highly de!eloped and competiti!e markets of Jetherlands, B6, Dermany, France and Italy 'aruti !ehicles ha!e made a mark. /hough the main market for the 'aruti !ehicles is <urope, where it is selling o!er 42. of its e3ported +uantity, it is e3porting in o!er 42 countries. 'aruti has entered some uncon!entional markets like Angola, Fenin, E ibouti, <thiopia, 'orocco, Bganda, (hile, (osta 7ica and <l &al!ador. /he 'iddle"<ast region has also opened up and is showing good potential for growth. &ome markets in this region where 'aruti is, are &audi Arabia, 6uwait, Fahrain, Catar and BA<.

/he markets outside of <urope that ha!e large +uantities, in the current year, are Algeria, &audi Arabia, &rilanka and Fangladesh. 'aruti e3ported more than 51,222 !ehicles in ,22*"21 which was 59. higher than last year. In the financial year ,22*"21 'aruti e3ports contributed to more than 12. of total 'aruti sales. ,7 MARUTI EMERGING AS R?D U! 'OR SU9U"I MOTOR CORPORATION

$apanese auto ma or &u#uki is all set to con!ert 'aruti Bdyog Atd0s research and de!elopment 97?E: facility as its Asia hub by ,224 for the design and de!elopment of new compact cars, according to a top official of the firm. /he country0s leading car manufacturer will make substantial in!estments to upgrade its research and de!elopment centre at Durgaon in ;aryana for e3ecuting design and de!elopment pro ects for &u#uki. /his includes localisation, modernisation and greater use of composite technologies in upcoming models.

/he company will be hiring more software engineers and technocrats to handle &u#uki0s 7?E pro ects. In!estment would be more in terms of manpower than in infrastructure, which is already in place. Apart from working on inno!ati!e features, the 7?E teams will focus on latest technologies using (AE"(A' tools to roll out new models that will meet the needs of 'BA0s di!erse customers in the future. /he reasons as to why it can be good for 7?E is that Firstly the cost in!ol!ed in 7?E and infrastructure is low in India as compared to other countries. Also the technical skills are abundantly a!ailableI again at a cheaper cost. &econdly, India is growing as an e3port hub along with the Indian market growing aggressi!ely into becoming an attracti!e one for in!estors. /hirdly, &u#uki0s in!estment in India, is also important as it has completely di!ested now as a result 'BA will now become a 122. subsidiary of &u#uki in the coming year. "EY SUCCESS 'ACTORS (@)T#e Aua%ity Ad$a&tage 'aruti &u#uki owners e3perience fewer problems with their !ehicles than any other car manufacturer in India 9$.E. Power IC& &tudy ,221:. /he Alto was chosen Jo.1 in the premium compact car segment and the <steem in the entry le!el mid " si#e car segment across 9 parameters. (<)A !uyi&g EB/erie&)e Li0e No Ot#er 'aruti &u#uki has a sales network of *24 state"of "the"art showrooms across 189 cities, with a workforce of o!er -222 trained sales personnel to guide 'BA customers in finding the right car. (C)Aua%ity Ser$i)e A)ro++ @;CD Citie+ In the $.E. Power (&I &tudy ,221, 'aruti &u#uki scored the highest across all 4 parameters8 least problems e3perienced with !ehicle ser!iced, highest ser!ice +uality, best in"ser!ice e3perience, best ser!ice deli!ery, best ser!ice ad!isor e3perience, most user"friendly ser!ice and best ser!ice initiation e3perience. 9,. of 'aruti &u#uki owners feel that work gets done right the first time during ser!ice. /he $.E. Power (&I study ,221 also re!eals that 94. of 'aruti &u#uki owners would probably recommend the same make of !ehicle, while 92. owners would probably repurchase the same make of !ehicle. (E)O&e Sto/ S#o/ At 'aruti &u#uki, customers will find all car related needs met under one roof. Ghether it is easy finance, insurance, fleet management ser!ices, e3change" 'aruti &u#uki is set to pro!ide a single"window solution for all car related needs. (F) T#e Lo. Co+t Mai&te&a&)e Ad$a&tage /he ac+uisition cost is unfortunately not the only cost customers face when buying a car. Although a car may be affordable to buy, it may not necessarily be affordable to maintain, as some of its regularly used spare parts may be priced +uite steeply. Jot so in the case of a 'aruti &u#uki. It is in the economy segment that the affordability of spares is most competiti!e, and it is here where 'aruti &u#uki shines. (D)Lo.e+t Co+t o- O.&er+#i/

/he highest satisfaction ratings with regard to cost of ownership among all models are all 'aruti &u#uki !ehicles8 Len, Gagon 7, <steem, 'aruti 822, Alto and )mni. (=) Te)#&o%ogi)a% Ad$a&tage It has introduced the superior 1- V 1 ;ypertech engines across the entire 'aruti &u#uki range. /his new technology harnesses the power of a brainy 1-"bit computer to a fuel"efficient 1"!al!e engine to create optimum engine deli!ery. /his means e!ery 'aruti &u#uki owner gets the ideal combination of power and performance from his car.

'UTURE C ALLENGES 'aruti has always been identified as a traditional carmaker producing !alue"for"money cars and right now the biggest hurdle 'aruti is facing is to shed this image. 'aruti wants to change it for a more aggressi!e image. 'aruti Faleno has failed due to one of the ma or reasons being that customers could not identify 'aruti with a car as sophisticated as 'aruti Faleno. 'aruti is looking forward to bring about a perception change about the company and its cars. 'aruti started the e3ercise with the new"look Len, and &u#ukiOs decision to pick India as one of the first markets for this radically different"looking car ga!e this endea!or a new thrust. 'aruti has also changed its logo at the front grill. It has replaced the traditional 'aruti logo on grill Mstylish M'0 with &0. /he ma or thrust in the facelift endea!our is with the launch of 1.* litre &wift. It0s a style statement from 'aruti to Indian market. /he ne3t threat 'aruti faces is the growing competition in compact cars. (ompanies like /oyota, Ford, ;onda and Fiat are planning to come out with small segment cars in near future.Ford is launching Focus and Fiesta, D' is launching A!eo in ,22-, (he!rolet is launching &park in ,22-, ;yundai is launching its new compact car in ,22-, ;onda is launching $a## in ,22-, D' is has reduced prices of its (orsa, Fiat is coming up with Panda and new Fiat Palio, &koda is launching Fabia. All this will pose a ma or threat to 'aruti leadership in compact cars. Jew emission norms like Fharat &tage * which has come into effect from April ,225 has increased car prices by 7s.,2222 and Fharat &tage 1 which is coming into force in ,224 will contribute in increasing car prices further. /his could be of concern to 'aruti which is low cost pro!ider of passenger cars. Rise in petrol prices and growing popularity of other substitute fuels like (JD will be another threat to 'aruti. /here is also a threat to &u#uki from 7?E in!estment by /oyota and ;onda in ;ybrid cars. ;ybrid cars could run on both petrol and gaseous fuels. /here is a threat to 'aruti models ageing. 'aruti models like 'aruti 822 which is in market for the last twenty years and others like Len and <steem which ha!e also entered the decline phase are the other threats. 'aruti is planning phasing out Len in ,224 and there were rumors of phasing out 'aruti 822 also. /his all makes &u#uki to replace these brands with new launches . As &wift and Gagon 7 are replacing the Len market. 'aruti will ha!e to keep on making modifications in its present models or its models will face extinction.