Maruti Suzuki

The Company was established in 1981. A joint venture agreement was signed between the Government of
India and Suzuki Motor Corporation (SMC), Japan in 1982. The Company became a subsidiary of SMC in
2002. In terms of production volume and sales, the Company is now SMC's largest subsidiary.

SMC currently holds 56.21% of its equity stake. It is a public limited company and its shares are traded at
the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).

SWOT ANALYSIS

STRENGTHS WEAKNESS

 Market Leader with highest market  Lack of experience with foreign

share market
 Highest network of dealers and good  Heavy import tariffs
after sales service  Government intervention due to high
 Strong Brand value market share
 Loyal customer base

OPPORTUNITIES THREATS

 Increasing purchasing power of  Threats from Chinese car

Indian middleclass category manufacturers
 Tax benefits  Maruti Suzuki have lost its market
 Foreign collaboration share due to small players like
 R&D on electric cars Volkswagen- Polo.
Consolidated Statement of Profit and Loss
for the year ended March 31, 2019

(All amounts in ` million, unless otherwise stated)

Notes Page For the Year For the Year

Particulars
No. No. ended 31.03.2019 ended 31.03.2018
I Revenue from operations 23 261 II 860,685 820,411
Other income 24 262 III 25,616 20,458
Total Income (I+II) 886,301 840,869
IV Expenses
Cost of materials consumed 25.1 262 450,257 449,432
Purchases of stock-in-trade 150,266 100,021
Changes in inventories of finished goods, work-in-progress 25.2 262 2,116 408
and stock-in-trade
Excise duty 44 289 - 22,317
Employee benefits expense 26 263 32,850 28,634
Finance costs 27 263 759 3,458
Depreciation and amortisation expense 28 263 30,208 27,598
Other expenses 29 263 116,385 99,956
Vehicles / dies for own use (1,221) (991)
781,620 730,833
Total expenses (IV) 1,273 1,366
V Share of profit of associates 284 267
VI Share of profit of joint ventures 106,238 111,669
VII Profit before tax (III - IV + V + VI)
VIII Tax expense 29,338 33,505
Current tax 30 264 394 (643)
Deferred tax 30 264 29,732 32,862
76,506 78,807
IX Profit for the period (VII - VIII)
X Other Comprehensive Income
A (i) Items that will not be reclassified to profit or loss (436) (197)
(a) gain / (loss) of defined benefit obligation .... 14.5 253 (1,745) 3,470
(b) gain / (loss) on change in fair value of equity instruments ............. 14.6 254 (2,181) 3,273
150 39
A (ii) Income tax relating to items that will not be reclassified 30 264
to profit or loss
B (i) Items that will be reclassified to profit or loss 2 (2)
(a) effective portion of gain / (loss) on hedging instruments 14.7 254
in a cash flow hedge 2 (2)
(1) 1
B (ii) Income tax relating to items that will be reclassified 30 264
to profit or loss 3,311
Total Other Comprehensive Income (A (i+ii)+B (i+ii)) (2,030 82,118
XI Total Comprehensive Income for the period (IX + X) )
Profit for the year attributed to: 74,476 78,800
Owners of the Company 7
Non controlling interest 76,491 78,807
15
Other comprehensive income for the year attributable to: 76,506 3,311
Owners of the Company -
Non controlling interest (2,030) 3,311
-
Total comprehensive income for the year attributable to: 82,111
Owners of the Company (2,030 7
Non controlling interest ) 82,118

Earnings per equity share (`) 32 266 74,461 260.88

15 260.88
Basic
Diluted 74,476
253.26
253.26
Consolidated Balance Sheet
for the year ended March 31, 2019

ASSETS
Non-current assets
Property, plant and equipment 4 243 149,862 130,771
Capital work-in-progress 4 243 16,069 21,321
Intangible assets 5 244 4,511 3,117
Financial assets
Investments 6 245 324,581 349,058
Loans 7 248 2 2
Other financial assets 9 249 344 328
Other non-current assets 12 251 20,591 18,587
Total non-current assets 515,960 523,184
Current assets
Inventories 10 250 33,226 31,602
Financial assets
Investments 6 245 50,455 12,173
Trade receivables 8 249 23,128 14,654
Cash and bank balances 11 250 1,878 740
Loans 7 248 161 30
Other financial assets 9 249 4,964 2,846
Current tax assets (net) 22 261 4,277 4,115
Other current assets 12 251 5,638 13,140
Total current assets 123,727 79,300
Total assets 639,687 602,484
EQUITY AND LIABILITIES
Equity
Equity share capital 13 251 1,510 1,510
Other equity 14 252 469,411 424,084
Equity attributable to owners of the Company 470,921 425,594
Non controlling interest 15 255 176 161
Total equity 471,097 425,755
Liabilities
Non-current liabilities
Financial liabilities
Borrowings 16 256 80 100
Provisions 18 257 395 265
Deferred tax liabilities (net) 19 258 6,139 6,020
Other non-current liabilities 20 260 20,371 15,859
Total non-current liabilities 26,985 22,244
Current liabilities
Financial liabilities
Borrowings 16 256 1,496 1,108
Trade payables
Total outstanding dues of micro and small enterprises 21 260 682 711
Total outstanding dues of creditors other than micro 21 260 95,695 104,282
and small enterprises
Other financial liabilities 17 257 14,420 13,338
Provisions 18 257 6,254 5,609
Current tax liabilities (net) 22 261 6,729 8,541
Other current liabilities 20 260 16,329 20,896
Total current liabilities 141,605 154,485
Total liabilities 168,590 176,729
Total equity and liabilities 639,687 602,484
Ratio Analysis
PORTER’S FIVE FORCES MODEL
Michael Porter identified 5 forces that determined the long run attractiveness of a business.
analyse of Porter’s five forces in context of the Maruti Suzuki.

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 and expected retaliation.
Threat of Substitutes: Low to Medium

Maruti Suzuki faces serious threat from consumer 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 this year.

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 tier suppliers
and second tier suppliers are assembled. There are a large number of automobile component
suppliers whose switching costs are very high. Thus reducing the bargaining power of the
suppliers.

Bargaining power of buyers: Increasing

Today, consumers are considered kings in the automobile market. There is an increasing
awareness among them and they are given a humongous number of choices. Buyers get
incentives in the form of cost discounts and better after sales services. This further increases the
bargaining power of the buyers.

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.
THREE GENERIC STRATEGIES
To cope up with the 5 competitive forces –there are Three Generic Strategies Maruti Suzuki
has applied:

Cost Leadership

Differentiation

Focus

1. To achieve cost leadership – To realize economies of scale upfront capital investment in

state-of-the-art equipment plant is required. Maruti Suzuki has set up two such state of art
manufacturing facilities in India
 Gurgaon facility(300 acres) housing the ‘K’ Engine Plant
 Manesar facility(600 acres)

2. Differentiation- creating something that is perceived industry wide as unique.

Differentiation can take many forms:
 Brand Name- Maruti Suzuki
 Technology- The highly fuel efficient, technologically advanced K series engines
have been very well appreciated by the customers for their performance
 Service- Best Service/highest no. of service centres
 Dealer network- Highest
 Quality- Value for performance
3. Focus is the moderator of the other two strategies:-
 Cost Focus--- Maruti also tried to offer a low price product to a small and
specialised group of buyers. This helped MUL to cut down prices just hours
before TATA introduced Indica.
 Differentiation Focus---Maruti also 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.
BCG MATRIX

BCG Growth share matrix developed by Boston consulting group of USA in the early 1970's and
popularly known as BCG Matrix takes a two dimensional views.

I. Industry growth rate.

II. Relative market share.

The BCG model is a well-known portfolio management tool used in product life cycle theory.
BCG matrix is often used to prioritize which products within company product mix get 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 Zen and Swift are in this scenario.
 The Cash Cow cycle deals with low growth and high share. This scenario
requires a low investment, but the growth is very slow. Wagon R and Alto are in
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.

GE/MCKINSEY MATRIX

The GE/McKinsey Matrix is a nine-cell (3 by 3) matrix used to perform business portfolio

analysis as a step in the strategic planning process. The GE/McKinsey Matrix identifies the
optimum business portfolio as one that fits perfectly to the company's strengths and helps to
explore the most attractive industry sectors or markets.

The objective of the analysis is to position each SBU on the chart depending on the SBU's
Strength and the Attractiveness of the Industry Sector or Market on which it is focused. Each
axis is divided into Low, Medium and High, giving the nine- cell matrix as depicted below.
Grow – Business units that fall under grow attract high investment. Firms may go for product
differentiation or Cost leadership. Huge cash is generated in this phase. Market leaders exist in
this phase.

Hold – Business units that fall under hold phase attract moderate investment. Market
segmentation, Market penetration, imitation strategies are adopted in this phase. Followers exist
in this phase.

Harvest -Business units that fall under this phase are unattractive. Low priority is given in these
business units. Strategies like divestment, Diversification, mergers are adopted in this phase.