50605951-Maruti-800-Case-study (1)

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<p>PROJECT REPORT ON MARUTI 800</p> <p>Submitted to: Prof. P. Bharadwaj</p> <p>Submitted By: Hitesh Babbar 2010079</p> <p>Jhanvi Thakkar 2010086 Kanupriya Kohli 2010090 Nirmal Modh Kiran Karkera 2010099 2010093</p> <p>Topic for the study: Maruti 800 Model car of the MUL company. Justification and Relevance: Maruti 800 was a revolution of sorts in the 4-wheeler area in India. It was the first small car to be launched in India. The strategies used by MUL from time to time to maintain/increase the sales of Maruti 800 were exemplary. It was the leader in market sales for nearly 20 years.</p> <p>All these points make for a good case-study.</p> <p>INTRODUCTION:Company (MUL) Introduction:MUL was a joint venture created in February 1981 between Japans Suzuki Motor Company and the Indian Government when the latter decided to produce small, economical cars for the masses. The intention from the beginning was to produce a peoples car. To get the project off the ground MUL took over the assets of the erstwhile Maruti Ltd., which was set up in 1971 and closed in 1978. It was the fag-end of 1983, in the cold winter of North India, when one Harpal Singh of New Delhi was handed the keys to a small, never-seen-before-in-India, hatchback by the then Prime Minister, the late Indira Gandhi. What in any other circumstances would have been just an ordinary car launch turned out to be the start of the automobile revolution in India.</p> <p>Product (Maruti 800) Background:On December 14, 1983, MUL launched the first Maruti vehicle the Maruti 800. The first model was the SS80, a 796cc hatchback car priced at Rs. 47,500. Subsequently, in spite of price hikes, the car remained within the reach of the Indian middle class and became a runaway success. Available in vibrant colours when Indias passenger car population comprised mainly Ambassadors and Fiats in black and white, M800 gave Indians the first taste of global quality and reliability. In the 1980s, the Maruti 800 (M800) was Indias first peoples car. It caught the fancy of the middle class. Maruti Suzuki has never looked back since. In fact, in 2004, MUL will mark its 21st year of leadership in the Indian car market. The M800, first manufactured in 1983, has sold over 2.1 million units. Even though competition predicts that the A segment is dying, the M800 continues to sell an average 12,000 units per month. The Maruti 800 may be based on 1980s technology, but it remains very popular as an entry-level model in India. Its obituary has been written before, but the 800 has defied predictions of its demise. But changes to the regulatory environment in India could finally mean the end of the road for the 800.</p> <p>The past: Limited choices better left alone India's protected market meant that until the early eighties Indians had essentially three model choices in terms of automobiles: the Morris Oxford derived Hindustan Ambassador, the Fiat 1100 derived Premier Padmini and the Standard Herald derived Gazel. With all three products obsolete, quality construction more of an afterthought and attributes like power, safety and comfort being last on a manufacturer's to-do-list, the Indian automobile industry was going through what might be termed its anthracite period in history. The company Maruti Udyog was conceived by the Indian government in 1981 as a means of providing affordable personal transportation to Indians. Named after Hanuman, the name of the God of Wind in Hindu mythology, Maruti was the brainchild of the late Sanjay Gandhi, son of the then Prime Minister Indira Gandhi. After toying with the idea of a joint venture with Volkswagen, Renault, Daihatsu and some other majors, Suzuki was short-listed because of the Japanese major's expertise in small cars. The Maruti 800 based on the European Alto IV (SS80 in export markets) was launched in December 1983 in a four-door, two-box saloon (the tailgate opened only from the externally hinged rear window that was the access to the boot area) with a total length of 329.5cm. The car was powered by a 796cc, threecylinder, SOHC, 6-valve, carburetted engine and had front-wheel drive. Power was 39 bhp, which though not much, still made for a respectable power-toweight ratio because the car weighed slightly above 600kgs. The launch price was INR 47,500 making it the cheapest car at that time in India. The rivals tried to play it down on the power front, citing three cylinders to be insufficient for taking on a five-passenger load. However, the Maruti 800 proved everyone wrong by a long margin. It was a time of licenses in India and manufacturers needed to get a license from the government on what to make and what numbers to make. This used to create a huge gap between demand and supply resulting in long waiting lists. Often waiting lists for cars would take up to three years to clear. A Maruti 800 booked in 1984-85 would be cleared only by 1987-88. The 800 soon notched up a huge waiting list as sales boomed. The Maruti 800, in 1983, marked the introduction of the modern automobile into the Indian passenger car market. People were awed by Japanese reliability, ease of operation, refinement and fuel efficiency - attributes that the small Indian passenger car industry, in 1983, was unable to provide.</p> <p>STRENGTH</p> <p>WEAKNESS</p> <p>SWOT ANALYSISOPPORTUNITIES THREAT</p> <p>Maruti- Suzukis strength at the time of its entry in the Indian auto sector was its technological know-how and ability to produce quality products. They had expertise in engine building courtesy Suzuki .They knew what the Indian car buying populace desired and they delivered it in spades. Weakness at the time could only have been its relative inexperience with the Indian audience. Maruti were entering muddy waters and they read the minds of the consumer so well that the company became Indias largest car manufacturing company with the largest number of models and iterations on the road and today with a commanding market share of close to 50%. Opportunity that was quickly realized by Maruti was the existing demand for enhanced mobility among the Indian car buying audience. They wanted and deserved better products which Maruti had and was ready to sell to them. The growing purchasing power and disposable income of the Indian middle class was at an all time high which was perfectly tapped by Maruti with the all conquering 800. Threat at the time could only have come by way of sanctions that the Indian government could have applied on Maruti or from a similar new entrant that could have also entered the Indian market like Suzuki. There was no major threat to its operations either from its existing competitors or perspective new players. So all in all, things were favorable for Maruti on virtually all fronts.</p> <p>PEST ANALYSIS for Maruti Suzuki to enter IndiaPOLITICAL FACTOR: The political environment favored Maruti to enter the Indian market with tie up with Suzuki at the time in 1983. The government was lifting sanctions and making it easier for foreign players to enter the market. In 1983, the government permitted Suzuki - for some time, the only FDI player - to enter the market in a joint venture with Maruti - a state operated enterprise at the time. Ten years later, as part of a broader move to liberalize its economy, India de-licensed passenger car manufacturing and opened it up further to foreign participation. The 800, being a Maruti model, enjoyed a number of benefits from the government. There were other sops too specifically for Maruti, which helped the company keep prices down for the 800. The Indian government is alleged to have curbed competition in order to promote stateowned Maruti. Consequently, several new car projects like Premier Automobiles planned tie-up with Nissan to manufacture the Sunny in the mid80s did not receive government approval. ECONOMICAL FACTOR: The economic conditions in India where favoring Maruti Suzuki because the people were willing to spend more on automobile sector. The Indian economy was doing better and after the last decades emergency rule under Indira Gandhi the eighties was a time of development and stabilization for the economy and people. The disposable income of the middle class was rising and they could now think of investing in things like better homes and cars so Marutis entry at the time was perfect. SOCIAL FACTOR: Socially the Indian middle class was gaining in repute and spending power. The common man wanted to buy a family car that gave him mobility and didnt cost a bomb and was easier to own and maintain. The population was rising and there was a serious shortage of options as far as car models in the nation was concerned we were not exactly spoilt for choice as far as cars was concerned. TECHNOLOGICAL FACTOR: With the presence of only two players in the industry The Hindustan Motors AMBASSADOR and the Premier Padmini (PAL) FIAT, it is safe to say that technologically the cars being sold in the era were dated and old. Maruti entered India with Suzuki (Japan) and brought with itself latest technology that included a) A modern compact efficient engine</p> <p>b) Bucket seats c) Floor mounted gear box d) Better servicing options e) Cheaper spares So with a favorable PEST analysis Maruti Suzuki zoomed into the country and the hearts of millions of people.</p> <p>PORTERS 5 FORCE MODEL</p> <p>BARGAINING POWER OF CONSUMER: Negligible because of only 2 existing players in the market</p> <p>THREAT FROM SUBSTITUTES: No close substitutes at all</p> <p>BARGAINING POWER OF SUPPLIER: Very less because size of the unserved market was very large scale</p> <p>THREAT FROM NEW PLAYERS: Not at all because of the govt.'s J.V rules for new players</p> <p>THREAT FROM EXISTING PLAYERS: Negligible as the 2 players were selling 2 decade old products with no new models planned</p> <p>Segmentation, Targeting, Positioning of the Maruti 800:The Maruti 800 was mass marketed since day one and with India being a largely price-driven market; the 800 became an entry point for first time car buyers. Price difference between Maruti 800 and its nearest rival used to be about INR 50,000-100,000, which was 25-50% of the 800's price. The Maruti 800 was targeted at small families and the middle class. People who wanted to upgrade from a two wheeler to a 4 wheeler, the 800 had great aspirational value to millions of its first time buyers. The Maruti 800 made an excellent entry-level car. It was good value for money and yet came with basic amenities like air conditioning, coil-sprung rear suspension and bucket seats in the front. Indian legislation has also ensured that there were three-point seat belts all around. So it was positioned as an entry level car for those who wanted to step up to the world of four wheeling.</p> <p>Reasons for the success of the Maruti 800:Within a few months of its launch, the Maruti 800 became the largest selling car in India, a title it has held for every month since then, till the month of May 2004, when its stable-mate Alto led it by a few hundred units. Like all success stories, it is difficult to point out one single factor that has been responsible for the car's success, but several factors stand out, including: The Maruti 800 is the cheapest car in the Indian market. With India being a largely price-driven market, the 800 has become an entry point for first time car buyers. Price difference between Maruti 800 and its nearest rival used to be about INR 50,000-100,000, which is 25-50% of the 800's price. The Maruti 800 makes an excellent entry-level car. It is good value for money and yet comes with basic amenities like air conditioning, coil-sprung rear suspension and bucket seats in the front. Indian legislation has also ensured that there are three-point seat belts all around. Over the last twenty years the 800 has established a reputation for being trustworthy and reliable. The Maruti 800 is simple and basic and yet sophisticated enough to meet the requirements of safety and comfort. Maruti has the largest network of dealers in India, which means that the 800 has the widest reach. Apart from these, the 800, being a Maruti model, enjoyed a number of benefits from the government. There were other sops (Standard Operating Procedure) too specifically for Maruti, which helped the company keep prices down for the 800. The Indian government is alleged to have curbed competition in order to promote state-owned Maruti. Consequently, several new car projects like Premier Automobiles planned tie-up with Nissan to manufacture the Sunny in the mid-80s did not receive government approval. Thus the Maruti 800 (actually up to the late 90s) did not have any real competition in the Indian market. A long period of more than 15 years without any real competition ensured that the 800's volumes stayed high, enough to amortise costs of the plants and dies used for manufacturing. This has ensured that the Maruti 800 has managed to retain its low pricing in a market where the nearest competitor, till a few months back, was priced about 50% higher.</p> <p>The 800's effect on India:It would be wrong to credit the 800 with merely the physical growth of the Indian market in its early days. The car has been for the Indian market what the 2CV and the Beetle have been for their respective markets. The 800 has been the car that has put India on wheels. Thanks to the model being launched in 1983, the Indian automotive benchmark was raised a few notches in terms of performance and quality. From an object of purely aspirational value, the 800 has transformed the passenger car in India to a perception more along the lines of a basic necessity. In doing so the 800 has provided a platform for all the models higher than it in the market. It has helped the market to mature to a level in which there is a place for many product segments and, at the top-end, models like the Porsche Cayenne or the latest S-Class. The 800 has encouraged low pricing in the Indian marketplace. Thanks to the low price benchmark set by the 800, competitors are inclined to price their products lower to come close to the 800. This has resulted in a market where the B-segment hatchbacks start retailing at little above INR 250,000 and a subcompact like the Tata Indigo and the Ford Ikon (three-box Fiesta saloon based on last generation European model) at little above INR 400,000. This has made a number of cars more accessible to the Indian customer. The employment generated (both primary and secondary) was huge as Maruti resulted in the growth of a number of ancillary units. Thanks to the large volumes produced of the 800, the ancillary industry that started with Maruti in the Delhi-National Capital Region has benefited the most. Companies like Sona Steering (now Sona Koyo), Subros and Jai Bharat Maruti are amongst the most successful suppliers in India. On the other hand the contribution of the 800 in the socio-economic development of the satellite townships of Delhi cannot be denied. The initial phases of the growth of Gurgaon (a significant satellite township of Delhi) was fuelled...</p>