ANALYSIS OF MARUTI December 27, 2006Arunesh Chand Mankotia
AUTOMOBILE INDUSTRY IN INDIA• Automobile Industry in India is still in its infancy but growing rapidly.• The opportunities in the automobile industry in India are attracting big names with the big purse and they are investing vigorously in infrastructure, design and development, and marketing
• India is the 2nd largest two wheeler manufacturer in the world• Second largest tractor manufacturer in the world• 5th largest commercial manufacturer in the world• 3rd largest car market in Asia, surpassing China in the process
Major players have started sourcing components from India, such as• Fiat Plans To Source US $200 mn. Worth Of Components From India Per Annum• Mercedes Benz (Daimler Chrysler) Has Set Up 7 Component JVs In India For Global Sourcing Of Parts• Cummins USA Is Already Sourcing Engine Parts From India For Cummins Global Operations• Multi National such as DELPHI and VISTEON have started exporting components made in India to their various other plants around the world- Investing further to make India as a manufacturing base.
• Key Player 402• Investment US $ 2.3 billion• Output US $ 4 billion• Exports US $ 417 million• Employment 250,000 persons
Industry SegmentsThe Indian automobile segment can bedivided into several segments viz.Two-wheelers (motorcycles, geared andungeared scooters and mopeds),Three wheelers, commercial vehicles (light,medium and heavy),Passenger cars, utility vehicles (UVs) andSUVs
Industry ScenarioAround 80% of all new cars are financed. Theincreased availability of finance at low ratesand strong GDP growth translated in a healthygrowth for the industry.
Major Manufacturers of Automobiles in India • Maruti Udyog Ltd. • Hyundai motors India • TATA motors • Honda • Toyota • General Motors India • Ford India Ltd. • Fiat
Player wise Market Shares 16% MUL M&M 45%17% TATA HYUNDAI 15% 7% OTHERS
Company Background Maruti Udyog Limited was established in 1981 to meet the growing demand of a personal mode of transport caused by the lack of an efficient public transport system. Suzuki grabbed the opportunity in 1983 with both hands and formed a joint venture with the Indian Government, which was called Maruti Udyog Ltd (MUL). The first cars rolled out for sale on 14th December 1983• The company reached a total production of one million vehicles in March 1994,• Becoming the first Indian Company to cross this milestone. It crossed the two million mark in 1997.
Board Member of Maruti• Mr Shinzo Nakanishi, Chairman• Mr Jagdish Khattar, Managing Director• Mr Hirofumi Nagao, Joint Managing Director• Mr Shinichi Takeuchi, Joint Managing Director• Mr Kinji Saito, Director (Marketing and Sales)• Mr Osamu Suzuki, Director• Mr R C Bhargava, Director• Mr S V Bhave, Director• Mr Kumar Mangalam Birla, Director• Mr Amal Ganguli, Director• Ms Pallavi Shroff, Director• Mr Manvinder Singh Banga, Director
The Objectives of MUL– Modernization of the Indian Automobile Industry.– Production of fuel-efficient vehicles to conserve scarce resources.– Production of large number of motor vehicles which was necessary for economic growth.
VISION“ The leader in the Indian Automobile Industry Creating customer delight and shareholder’s wealth; A pride of India”
The company’s operating margins, as is evident from the graph, hasbeen consistently improving since 3QFY04.This improvement is on a low base and further increase is likely to belimited. This is because of two reasons. One, new model launches willrequire additional promotional expenditures and secondly, given theintensity of competition, there is likely to be pricing pressure on existingmodels.
Contd……• Maruti postpones diesel Esteem launch – Decided to apply brakes on the launch of diesel version of its mid-size offering Esteem as well as Gypsy.• Increase capital expenditure in the next 2 years in order to increase the capacity and more importantly, to enter the diesel-engine market
Product SegmentationModel Length Classification Price Classification • M 800 A1 Mini A • Alto A2 Compact B • Baleno A3 Mid-size C • Esteem A3 Mid-size C • Wagon R A2 Compact B • Zen A2 Compact B • Versa UV C • Omni UV A • Swift B+
Value Chain Analysis Raw materials Processing Finished GoodsRaw Materials cost = 84,406 Total sales=1,16,894 Value addition = 32,488
PEST Analysis• Political - Government Initiative.• Economic – Rising Oil prices. – Export growth of 59%. – More investment growth. – 6.9% GDP.
• Social Cultural • Awareness high. • Disposable income is high. • Attitudes• Technological – Internet. – Distribution – Cheap products
PORTER’S FIVE MODEL Threat of new entrants Bargaining power Bargaining of suppliers power of buyers Threat of Substitute products and services
STRENGTHS• Leader in small cars• Market Share• Growth exports• superior technology, styling• One stop shop• True value’, ‘Maruti finance’‘Maruti Insurance’• After sales service
WEAKNESSES• Product diversification• No diesel car• Perception about quality• Weak image of made in India
OPPORTUNITIES• High scope of domestic consumption• Huge export market• Auto components• Easy availability of finance at low interest rates
THREATS• Rising oil prices• Growing d or premium car segment• Mid-size cars crossed the one-lakh mark at 1.38 lakh units• Low manufacturing cost in china and Thailand
Present Strategies being Followed• Price-cut strategy• Using JIT in order to reduce Inventory• Company has also implemented a vehicle-tracking system• Maruti Udyog Ltd is all set to deal in `pre-owned cars from other manufacturers at its True Value outlets• Maruti earmarks nearly 0.3 per cent of its turnover as IT spend• Sending engineers from India to Japan for a long-term training• Transfer of technology• Tied up with Appu Ghar• MUL has also organised a simple contest for visitors.
Policy• Nothing goes waste• Expanding the car market• Operational efficiency and productivity
New Strategies• More on R&D• Introduce at least one new passenger car model every year• Also plans to displace the good old Ambassador from the taxis and government vehicles segment. – We are also offering discounts to taxi owners to buy our cars.
RECOMMENDATIONS• Continuous value addition to professional skill• Training customized to meet organizational objectives• Competency mapping to identify individual training needs• Outsource HR for long term strategic plan• Focus on Product Diversification• Should launch Diesel cars
Since the opening up of the Indianautomobile market in the early 1990s, a lothas changed. Customers can nowchoose from a wide range of models.Marutis overwhelming dominance of themarket has gone. Yet, one thing remainsunchanged - the price sensitiveness ofIndian customers.