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Maruti- Strategy


Steffanie Thomas

on 20 March 2016

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Transcript of Maruti- Strategy

Change colors
Maruti Timeline
Threat of New Entrants:

• market saturated
• high overhead costs
• over capacity of the market
• high exit barriers (e.g. high overhead costs when leaving the market)
• high costs for developments
• government regulations through taxes and subsidy policy
• low margins

Threat of New Entrants: high

Bargaining Power of Buyers:

• supply higher then demand
• consumers motivation: time, money, location
• no conversion costs
• high brand loyalty
• decrease of oil prices

Bargaining Power of Buyers: high
Competitive Rivalry:

Selected passenger car manufacturers' European market share in 2014, based on new registrations
Bargaining Power of Suppliers:

• high interdependence of suppliers and manufacturer
• OEM → handing down own cost pressure to suppliers
• 75% of value chain are outsourced to suppliers

Bargaining Power of Suppliers: low
Threat of Substitution:

• many means of transportation (buses, trains, planes, ships, bike)
• easy to change
• cars rapidly losing value

Threat of Substitution: High

Bargaining Power of Suppliers:

• high interdependence of suppliers and manufacturer
• OEM → handing down own cost pressure to suppliers
• 75% of value chain are outsourced to suppliers

Bargaining Power of Suppliers: low

By focusing on style and comfort this differentiates Kinto from its competitors, thus creating their USP.
Options (refer to handout)

Extended warranty
Electric/Memory front seats
Sensors and Park Assist
Heated Front Seats
Leather Upholstery
Metallic Paint
Blind Spot Info

KintoKar is differentiated amongst our competitor Pavara due to the level of options we offer to our consumers

The market research indicated that consumers are less concerned with safety, green and hi-tech and are more concerned with style and comfort. Therefore we chose options which fulfilled this demand
Competitors, inflation rates and the shrinking demand in the market had an impact on the pricing
Our main competitor Pavara had a low pricing strategy being perceived as a cheaper, basic model, over the four years they kept the same options with the same pricing strategy. The result of our pricing did see our level of sales increase

Problems which Kinto may face in Europe is the already established competition in the city car market and the needs and tastes of consumers. Due to Kinto only having one factory and a limited workforce this means that geographic spread would be small as the company can only produce so much.


It was outlined that the over 55 market are difficult to market too, with little or no impact from marketing communications. Therefore for marketing tools we decided to use, television, radio, magazines/ newspapers and promotional tools.

Television, radio, magazines/ newspapers and promotional tools were used
The Future
difficulties in the first four years have caused problems for Kinto to establish themselves in the market and to regain market share.
Kinto aims to launch the car with a new facelift and build quality, thus with the aim to change the perception in which consumers view the car.

Body Style:
• 2/4 Door Saloon/Estate

• Small Petrol Engine
• Diesel

Options (refer to handout):
• Extended Warranty/ Servicing
• Anti-Theft System
• Sensors/Park Assist
• Heated Front Seats
• Blind Spot Information System
• Metallic Paint
• Leather Upholstery/ Finish
• Tyre Pressure Monitoring
• Luxury Styling Pack


First Pull Strategy with TV & Magazine

Now both (Push & Pull) through adding Dealer Incentives

Aim was to raise our sales & getting a better dealer-seller relation


Changes in Price over the years because of inflation and new options/ higher material costs

Year 1: 16,000 Year 3: 17,500
Year 2: 16,550 Year 4: 16,250


Through including options & allocate the Perception Factors we are trying to provide our customers with the experience of a stylish and comfortable but still fast car
Future Positioning...


After analysing the luxury “Pavara” model, already released, which was low in price and low in features we decided to create a model which would go for higher price and would contain more features such as style, comfort and speed

VW, Europe's biggest automaker, and PSA Peugeot Citroen rose 6.9 percent and 1.1 percent respectively while luxury nameplates BMW and Daimler were up 9.4 percent and 2.2 percent. (Reuters, 2014)


Decisions in advertising were backed up according to the basis of the promotional effect sheet
The Future
The company will be re – launching product
Despite falling sales, K-Lux is still selling out
Productivity and workers
Peak at Year 3 - 102 cars per worker
Productivity is falling again

Despite large investment in promotion in year 4, sales have not increased - perhaps due to failing life cycle of car
• Kinto is still only company occupying the over 55s medium car market
• Luxury car is still selling out
• Despite trouble, Kinto Kar still outsells direct competitor


• Massive amounts of debt (refer to handout) – not selling enough cars
• Company is struggling to grow and achieve scale – therefore cannot occupy large market share

Archick, K. (2015) 'The European Union: Questions and Answers' [Online] available at: http://fas.org/sgp/crs/row/RS21372.pdf 03/03/2015
Automotive Council UK. (2013) Government drives forward plug-in car revolution, [Online] available at: http://www.automotivecouncil.co.uk/2013/09/government-drives-forward-plug-in-car-revolution/ accessed: 26/02/2015
Bahrampour, T. (2014) The kids gone, aging Baby Boomers opt for city life, [Online] The Washington Post, available at: http://www.washingtonpost.com/local/2013/08/05/1a21c1b2-fba7-11e2-a369-d1954abcb7e3_story.html accessed: 22/02/2015
Bloomberg, (2014) In Car Buying, Baby Boomers Surpass the Young, [Online] Available at: http://www.bloomberg.com/news/videos/b/86578e6e-87f6-4631-b2ef-7f359d5163d4 accessed: 22/02/2015
Clarke, W. (2014). Top 10 Vehicles for Seniors for 2014. Available: http://www.edmunds.com/car-reviews/top-10/top-10-vehicles-for-seniors-for-2014.html. Last accessed 2nd Mar 2015.
Doole, I. and Lowe, R. (2012) International Marketing Strategy: Analysis, development and implementation, sixth edition, Cengage learning, Hampshire
Fuhrman, V. (2014). German Auto makers to Shake up Luxury Market. Available: http://www.wsj.com/articles/SB10001424127887324235104578241481012862470. Last accessed 2nd mar 2015.
Harwell, D. (2014). Tesla and luxury car makers' surprising strategy to hook new buyers: Lower prices. Available: http://www.washingtonpost.com/news/business/wp/2014/10/09/tesla-and-luxury-carmakers-surprising-strategy-to-hook-new-buyers-lower-prices/. Last accessed 2nd Mar 2015.
Hirsh, E. et all. (2003). Reality Is Perception: The Truth about Car Brands. Available: http://www.strategy-business.com/article/03302?pg=all. Last accessed 2nd Mar 2015.
Hope, C. (2014) Over-55s to fuel spending boom on kitchens and cars from spending reforms, [Online] The Telegraph, available at: http://www.telegraph.co.uk/finance/personalfinance/pensions/11095589/Over-55s-to-fuel-spending-boom-on-kitchens-and-cars-from-pension-reforms.html accessed: 30/01/2015
Jones, M. (2014) Electric city car buying guide, [Online] available at: http://www.gq-magazine.co.uk/entertainment/articles/2014-11/24/electric-cars-best-models accessed: 01/03/2015
Magloff, L. (2015). What is Premium Pricing Strategy. Available: http://smallbusiness.chron.com/premium-pricing-strategy-1107.html. Last accessed 2nd March 2015.
Popescu, A. (2015) UK lead Europe’s electric car surge in 2014, [Online] The Guardian, available: http://www.theguardian.com/environment/2015/feb/06/uk-led-europes-electric-car-surge-in-2014 accessed: 01/03/2015
Reuters. (2014). Europe's car recovery persists as volume, luxury brands gain. Available: http://economictimes.indiatimes.com/industry/auto/news/passenger-vehicle/cars/europes-car-recovery-persists-as-volume-luxury-brands-gain/articleshow/45189438.cms. Last accessed 2nd Mar 2015.
Rosemain, M. (2015) European Car Sales Rise 6.2% With Economy Helping Renault, VW, [Online]
Bloomberg News, available at: http://www.bloomberg.com/news/articles/2015-02-17/european-car-sales-rise-6-2-as-economy-helps-renault-vw-demand accessed: 22/02/2015
Schulz, R (2006). The Encyclopaedia of Ageing. New York: Spring Publishing Company, Inc. 263.
Vincent, J. (2015) UK leads Europe in electric car growth, [Online] available at: http://www.theverge.com/2015/2/6/7991927/electric-car-growth-europe-2014 accessed: 22/02/2015

• strong oligopoly → the 8 biggest companies are sharing a market strength of nearly 80 %
• many merges (GM & OPEL; Daimler & Crysler)

• direct competitors like Pavara; True Auto; VW
• many companies are manufacturing outside the EU → cheaper
• other competitors are selling cars as well outside the EU → higher market growth and can therefore backup their losses in the EU

Competitive Rivalry: very high
By this ROI analysis we can see that our increased expenditure in advertising was not justified by sales, we aim to be more conservative in future.
Market Share %
Research showed our target market were not demanding electric/hybrid engines, however after four years, uptake is rising in certain European countries such as Germany, the UK and the Netherlands and we may consider offering it as an option for certain countries
Increase in pension pay-outs in the UK could be lucrative for Kinto
Good understanding of what our target market want
Due to new government safety regulations Kinto faces a 5% increase in material prices
Current Eurozone crisis could threaten a 'common trade policy' and economy in general (Archick, 2015)
Europe should remain 'cautious' about recent growth in car market as many incentives created to give a boost (such as 'Scrappage' and 'PIVE') are being ended this year
Direct competitors are still outselling Kinto in their luxury car model
Kinto may find themselves with a new entrant in the over 55s medium car market
Direct Competitor Perception Map
Bargaining Power of Buyers:

• supply higher then demand
• consumers motivation: time, money, location
• no conversion costs
• high brand loyalty
• decrease of oil prices

Bargaining Power of Buyers: high
Competitive Rivalry:

Selected passenger car manufacturers' European market share in 2014, based on new registrations

• strong oligopoly → the 8 biggest companies are sharing a market strength of nearly 80 %
• many merges (GM & OPEL; Daimler & Crysler)
• direct competitors like Pavara; True Auto; VW
• many companies are manufacturing outside the EU → cheaper
• other competitors are selling cars as well outside the EU → higher market growth and can therefore backup their losses in the EU

Competitive Rivalry: very high
Bargaining Power of Suppliers:

• high interdependence of suppliers and manufacturer
• OEM → handing down own cost pressure to suppliers
• 75% of value chain are outsourced to suppliers

Bargaining Power of Suppliers: low - moderate
Threat of Substitution:

• many means of transportation (buses, trains, planes, ships, bike)
• easy to change
• cars losing rapidly value

Threat of Substitution: high

“If you have travelled in India, taken a route to anywhere around this great nation, chances are you’ve driven with us. For over three decades now, Maruti Suzuki cars have been going places.”
It was about a commitment to create value through innovation, quality, creativity, partnerships, openness and learning. It created a road that was going to lead the world in to a whole new direction, laid out by Maruti Suzuki.

Epicentre Of The Automobile Revolution
In India.

Hit The Streets To Begin A Whole New Chapter

Obsession For Customer Delight

Maruti- India's Largest Car Maker
“A commitment to road safety to make Indian roads safer.”


“To be the leader in the Indian automobile industry, creating customer delight and shareholders’ wealth: a pride of India”


Lead and facilitate change towards creating a positive environment for employees, where people understand and believe that they have to contribute to the fullest in making MSIL an excellent organization, which can then facilitate for the employees opportunities for career development and growth and a feeling of pride to be a part of MSIL.

Market Leadership
In 2015 , after 14 years, Maruti regained 50% share of domestic market : sold 416,000 units, which is 47.51% of the total passenger vehicles sold in the country.
Focus on B- segment cars
People are moving from the A segment to the B segment
Expected to control 50% of the market in the coming years, too
Major concern may still be company’s absence in the compact sports utility vehicle (SUV) segment
Customer Delight
True value scheme
Driving school
Authorized service station
Vehicle Insurance
Genuine accessories
Monitoring environmental performance of its manufacturing operations, products and supply chain
Vision , Mission and Core Values
Holds its place as the best after-sales service
True value scheme, Driving school , Authorized service station
Vehicle Insurance, Genuine accessories

 It has 110 patents (around 20 in the production line alone), and most of these have been developed by its young engineers – Idea is to encourage out of the box thinking
 Labour union leaders are being sent to Japan for a week
New recruits are sent to Japan (to the parent company) for idea exchange and to learn new processes that can be adopted here
First to bring the AMT or the automated manual transmission
“Zero exit programme”
N2N Fleet Management
Maintaining valuable relationship with dealer
Green Product, Green Manufacturing, Green Supply Chain

Maruti is concentrating on  key success qualities, namely quality products and expansive after service network.
New vehicle sale is like an income from the share markets, on the other hand the income from the service network is akin to a fixed deposit in a bank, which means that the new car sales is subjected to change but the income from servicing is rather fixed

The company produced one million vehicles in March 1994. -“The first Indian Company to cross this milestone”
MUL enjoyed a near-monopoly status, until Liberalization in 1991 which led to the entry of foreign players like Hyundai,Fiat, Mitsubishi, and Toyota. Indian players like Tata Motors and Mahindra giving tough time
Introduced new models, and upgrade its existing models in response to market demand. Introduced the hatchback Swift to shed its image of being a manufacturer of low-cost staid cars.

Industry Attractiveness: HIGH
Maruti can come to know who are their close and direct competitors, in terms of price and targeting middle income group families.
Strategic problems which Maruti needs to focus upon.
Maruti can easily analyze whether there is an opportunity to enter high premium segment and what is the favourability.

No Competition
For the 7 years of its life in India, Maruti-Suzuki only had to contend with HM Ambassador, Premier Padmini and some Mahindra utilities.
Positive word of mouth feedback from the initial Maruti owners who were experiencing Japanese engineering and build quality for the first time helped.

Partially losing way before waking up with a vengeance

New entrants like Hyundai nibbled at some of Maruti-Suzuki’s market share
Things started turning around with the launch of the Suzuki Swift model, the first model in a segment undefined till then.

Freestyle hand-to-hand combat to fight for every inch of market share

Maruti-Suzuki has wielded off a full blown attack from competition as Hyundai, Tata, Honda, Toyota, Ford, etc.
Contemporary competition in Maruti-Suzuki’s way and the company has had to respond with contemporary models of its own.

Three Phases on the Timelines of MSIL Success

Inbound Logistics
Primarily consists of raw materials and purchased components
Whole inbound system is focused “Just in Time” supply logistics
Selective Vendors, Use of IT, incentives for suppliers to get closer, realistic volumes to avoid access inventories

Fully integrated plant with flexible assembly lines
Have production management system with involvement of all levels for four pillars : cost , quality, safety and productivity
Challenge 50:30 – 50% increase in productivity with 30% cost reduction
Quality : Do it right first time , each employee works as cost manager

Outbound Logistics
Tied up with Indian railways and special auto Wagons to support high capacity, high speed and safe car transportation system.
True value dealership model with decent margin to the dealers
Professionally trained manpower in each of the centre

Marketing & Sales
Aim to reduce the customer’s cost of car ownership
Advertisements with customer connect
Largest dealership model with centralized and secure extranet network

Aim to meet the unsaid needs of the customer
“Maruti on road services” (24*7)
Rural areas service centres are given sales process

Secondary Activities of Maruti Suzuki
Green Supply Chain
Green Procurement Guidelines
85 % suppliers ISO 14001 certified

Supplier Risk Management

Supplier Evaluation

Local suppliers and local sourcing

Logistics improvements
Technological Development
R& D team of over 1000 engineers
iGPi technology
State-of-the-art R&D centre in Rohtak worth Rs.2000 crores

Human Resource Management
“Joining Experience “
Flat structure for open communication
360 degree feedback, 2007
Rewards and Recognition
Cross-functional teams
Employee engagement through employee development

Firm Infrastructure
Kaizen :Improvement of in-house capabilities
Strong sales & distribution infrastructure
 1700 outlets in the country Rs.3000 crore for the upcoming plant in Gujarat
INR 4000 crore in infra, R&D in FY16

Dealer Network
Wide dealership network allows the company to service customers over a wider geographical area than competitors

True Value Operations
Maruti providing its customers an opportunity to resale their car to them or exchange with a new Maruti car under its “True Value” network has proven really beneficial. It was the first company to launch ‘true value’
Presence Across Segments
In a car manufacturing plant, the press shop, paint shop, engine and transmission assembly, and machine shop are used for manufacturing different models

Full range of cars-from entry level Maruti 800 & Alto to stylish hatchback A-star, Swift, Wagon R, Estill and sedans DZire, SX4 and Sports Utility vehicle Grand Vitara
Designing cars best suited for Indian market

Designing cars best suited for Indian market
Cost leadership in the market due to efficient value chain and manufacturing plants
Pan-India service network: 3060service stations in 1454 cities

7 process shops, 5 assembly lines, around 1,700 robots & 3 stages of inspection. Takes just 12 hours to make one car
One car every 12 seconds
Suzuki internationally known for Small cars
Launch of World class quality cars like SPLASH

BCG matrix has two dimensions market share and market growth. The basic idea behind it is: if a product has biggest market share, or if the products market grows faster, it is better for the company.

The four segment of BCG matrix: -

STAR, high growth and high market
CASH COW, low growth and high
market share
DOG, low growth and low market share
QUESTION MARK high growth
and low market share
Manufacturing & Excellence
Pioneer in latest technology
Lean manufacturing
Quality control
Strong Distribution Network
Strong dealership network comprising more than 450 cities
Huge service network of more 2750 franchises of service outlets
A new premium sales channel called NEXA
Forward & Backward Integration
Alliance with dealers
Alliance with suppliers
Other Customer Relationship Management Intiatives
Authorized service centers
True value
Anytime Maruti service
Automobile Industry Wage Ratio
Automobile Industry Specs Comparison
Cost Leadership
Maruti Suzuki is known as affordable, fuel efficient car that provides great value
Focuses on small market segment to beat the stiff competition
Focus on Vendor Management
Provided its vendors with higher volumes and higher efficiencies
Maruti does that by working with vendors, assuring them that for every dropin price, volumes will go up.
Maruti isnow encouraging its vendors to develop R&D capability for specializedcomponents.
Applying IT to Manufacturing
The e Nagare system, adopted from Suzuki Motor Corporation, smoothened Maruti’s Just In Time operations.
A new Vehicle Tracking System improvedefficiency on the shop floor and enhanced quality control
Low Cost Maintenance Advantage
Although a car may be affordable to buy, it may not necessarily be affordable to maintain, as some of its regularly used spare partsmay be priced quite steeply.
Not so in the case of a Maruti Suzuki. It is in the economy segment that theaffordability of spares is most competitive, and it is here where Maruti Suzuki shines
Maruti is almost synonymous with the small car segment in the industry
Car for the common man
Several first-time car buyers, purchasing a Maruti car remains an extremely viable option.
Differentiation Strategy with NEXA
Rome was not built in a day
Maruti's premium dealership in India
Positioned as high-end brand
Maruti Suzuki has returned with a fresh attempt to enter the high-end car segment
What is NEXA
Nexa is a retail network from Maruti Suzuki that caters the high-end consumers who have gone beyond their first cars and are now looking for an experience. It offers a high level of sophistication and is based on the principles of exclusivity, pampering and listening to the consumer.
The Hospitality Factor
One-on-One interaction with the consumers
Recruited around 1100 "relationship managers"
It designed the area where they will sit, how they will see the car and what drink will be served, how the relationship manager will begin the discussion, and a private space to discuss the financial things.
The premiumness at NEXA is not defined by pricing, but the content and the overall experience, said company executives.
The real challenge before Maruti was that people should not confuse Nexa with a new car, which honestly, people did in the beginning. So, in order to avoid that, Hakuhodo India used exterior of the showroom in the teasers.
Focussed Cost Leadership
The Vitara Brezza is going to be a major milestone for Maruti Suzuki as the locally developed vehicle will be sold abroad as well, showcasing the technological capabilities of the nation's top car maker.
With ‘Make in India’ being the call, Maruti Suzuki has kicked off a strong localisation drive, which will integrate strong elements from Indian R&D as well.
The Maruti Brezza sub-compact SUV will lock horns with products like Mahindra TUV300 and Ford EcoSport.
Priced between Rs. 6.99 lakh – Rs. 9.68 lakh
Ford Ecosport priced between Rs. 7.30 lakh - Rs. 9.22 lakh
Vitara Brezza
What Makes Maruti Special
Voluntary Retirement Scheme (VRS) shifted balance of power form the union to the management
The induction process had a very personal touch, which included meetings and dinner with top management and a cake cutting ceremony to celebrate the coming on board the MSIL team
Unique relationships with dealers where the dealers were treated as partners
Quality systems and practices rated best by A.V Belgium, global auditors for International Organization for Standardization
Ranked best in customer satisfaction 15 years in a row by J.D. Power in the Asia Pacific region
Constantly upgrading models with latest technologies while maintaining economies of scale
Extremely vast and constantly expanding sales network helps penetrate deeper into the country to find new buyers

What Maruti Learned from Competitors
Compensation policy treated everyone as equals and there was no motivation to perform better. Compensation benchmarking done in 2004 followed by salary restructuring.

High attrition in 2005 due to salaries dropping to 50th percentile, which were earlier in the 75th percentile. Benchmarking salaries with the IT industry was needed but was not done
The introduction of the Maruti 800 in the Indian car market in 1983

Comfort was one thing that the automobile Mogul, Suzuki decided to abandon. The safety factor too was compromised. This was brought down well below the Industry standard. This brought down the cost of the vehicle. The premium was placed on mileage. The kind of mileage offered was well above the standard set by the automobile industry. Well distributed service stations distributed along the length and breadth of the country was another feature which has never been offered at all. These two factors lifted the buyer value and created the buyer demand

Maruti is the largest passenger car company in India, accounting for around 45% market share

The Indo-Japanese alliance has tailored its growth strategy to aggressively penetrate India’s untapped rural markets by increasing the number of sales outlets and launching effective promotional campaigns to generate sales.
To counter the competition, Maruti started a major restructuring exercise in 2003.
The company focused on upgrading manufacturing, increasing capacity, launching new products at regular intervals so as to cater to all the segments of the Indian passenger car market and venturing into other related businesses like car finance, insurance and buying and selling used Maruti cars. Maruti's restructuring exercise helped the company hold its market leadership position and retain its market share.
Maruti Suzuki which controls slightly over half of the domestic car market in the country has said that it would design small cars suitable for the Indian conditions as a strategy to beat the stiff competition with the entry of global auto makers.It would be launching compact cars with more features to meet the needs of the customers locally.
After disinvestment in 2002, MSIL focused more on human resources. SMC wanted to make the organization more dynamic and more responsive to the increasingly competitive business environment.
Across the organization, 1,200 employees were offered a voluntary retirement scheme (VRS)
With the implementation of VRS, the notion of lifelong employment, a standard feature in many Indian organizations, ceased to exist
Over 1,000 blue-collar workers left the organization voluntarily and were compensated suitably
At the recently concluded Auto Expo 2016, Maruti Suzuki introduced a new philosophy called ‘Transformotion’, It marks the brand’s journey towards Maruti Suzuki 2.0 and stands on the following pillars – Vision, passion, resolution, revolution, innovation, evolution, creation, differentiation, distinction, exhilaration and customization.
Prepared By- Roll Nos 52-68
MBA (HR) 2015-17

Company Introduction
Strategic Intent- Mission & Vision
Core Values
Industry Analysis- Porter's 5 Forces
Industry Analysis- HHI
PESTEL Analysis
SWOT Analysis
Strategy Groups
Competitor Analysis
Value Chain Analysis
Sustainable Competitive Advantage
Key Success Factors
BCG Matrix
Core Competency
Porter's Business Level Strategy
Blue Ocean Strategy
Red Ocean Strategy
Retrenchment Strategies
Full transcript