PRODUCT LIFE CYCLE

MARUTI SUZUKI ESTEEM

Page | 1

An Overview of the Indian Automobile Market:

For forty years since India's independence from the British in 1947, the Indian car market

was dominated by two localized versions of ancient European designs -- the Morris

Oxford, known as the Ambassador, and an old Fiat. This lack of product activity in the

Indian market was mainly due to the Indian government's complex regulatory system that

effectively banned foreign-owned operations. Within this system (referred to informally

as the "license raj"), any Indian firm that wanted to import technology or products needed

a license/permit from the government. The difficulty of getting these licenses stifled

automobile and component imports, creating a low volume high cost car industry that

was inefficient, unprofitable, and technologically obsolete. For Hindustan Motors and

Premier the GOI directed as to what type of vehicle to manufacture. This affected the

growth of the industry significantly. The demand for cars in the 1960 was 15714 units

and in the next two decades this rose to 30989 units only resulting in an annual growth

rate (AGR) of 3.5%. In the 1980s, the GOI felt the need to introduce an affordable small

car, targeting the Indian middle class. As manufacturing a small and affordable car

required better technology than was available indigenously, the government tied up with

the noted Japanese company, Suzuki. The government formed a joint venture with Suzuki

and founded Maruti Udyog Limited (MUL). It held 74% and Suzuki got 26% equity

stake in MUL. In 1983, MUL launched the „Maruti 800', priced at Rs 40,000.

Over the years, the situation has improved significantly. Towards the end of last decade

the situation seemed to be brightened. In the new millennium the scenario has only

changed for the better. The total number of automobiles manufactured by Indian auto

industry, throughout financial year 2006-07 was close to 1.5 million. The chart on the

next page shows gradual growth in the sales of cars in Indian market.

Page | 2

Still there are a few shortcomings as India is still considered to be a developing country.

If India is to become a global automotive production and sales hub, the focus areas are:

A better transportation infrastructure;

Improved product quality;

More skilled workers;

Changes in labor and tax regulations;

An increase in the scale of exports of automotive companies.

Intellectual property protection

Improve transportation infrastructure – highways, ports and country's infrastructure, and

oil supply are possible inhibitors to the growth of the domestic automotive market.

Quality, scale and resources for support services for export - managing global supply

chain logistics, resources to support potential global warranty claims.

High quality research and development.

India‟s automobile sector consists of the passenger cars and utility vehicles, commercial

vehicle, two wheelers and tractors segment. The total market size of the auto sector in

India is approximately Rs 540 billion. An approximate market share of the segments of

the automobile industry is depicted by the pi chart.

Page | 3

The Indian automobile industry has witnessed the average annual growth of 10-15% over

the last decade or so. With the incremental investment of $35-40 billion, the growth is

expected to double in the next 10 years. The current growth rate indicates that by 2012

India will overtake Germany and Japan in sales volumes. The Indian automobile industry

is currently experiencing an unprecedented boom in demand for all types of vehicles.

This boom has been triggered primarily by two factors:

1. Increase in GDP, per capita income, disposable incomes and standard of living of middle

class Indian families has a major effect on the auto industry.

2. The Indian government's liberalization measures such as relaxation of the foreign

exchange and equity regulations, reduction of tariffs on imports, and banking

liberalization that has fueled financing-driven purchases. Especially, recently,

government has liberalized the investment norms for the auto sector. Local content

requirements and export obligations have been scrapped, and minimum investment

requirements also have been diluted. Import duties on vehicles and parts have been

gradually coming down. Several state governments also offer attractive incentives, such

as sales tax relaxations and concessional land, to potential investors.

The automobile industry is fairly concentrated now, as in most of the segments two to

three players have cornered a major chunk of the total sales. In passenger cars segment,

Maruti Udyog Limited, Tata Motors and Hyundai Motors control around 85 percent of

the total annual sales. Similarly, in the two wheelers segment, the sales volumes of Hero

Honda, Bajaj Auto and TVS Motors constitute around 80 percent of the total sales. The

following pi chart shows the market shares of different car makers in 2004.

Page | 4

In spite of increasing completion, the market share of Maruti increased to 54% in 2006.

The following chart shows the monthly market share (2007-08) of 3 major auto players in

India.

Page | 5

Overall Manufacturer Unit Volume based Rankings (2008-2009)

1. Maruti - 722,144.

2. Hyundai - 244,107.

3. Tata - 231,540

The Indian small car market is witnessing the highest growth at present. Highest selling

hatchback is the Maruti Suzuki Alto. The Hyundai i10 with 106,110 and a 137% growth

receive special mention.

Indian economy is developing at a rapid pace and the number of educated young people

well versed with computer and internet is also increasing. This creates a knowledgeable

customer base for car companies. The competition is tougher than ever because the

customers are only a few clicks away from sharing knowledge about rivals and

comparison with them. Car market in India is sure to experience growth and rise for the

fact that India now operates as a nodal point for various car manufacturers which are

originally foreign companies but have rested their faith on India as a car manufacturing

ground with man power easily available and a changing demography with huge potential

customer base.

Rational Behind Suzuki’s Going Global:

In 1909, Michio Suzuki founded the Suzuki Loom Company in the small seacoast village

of Hamamatsu, Japan. Though it started earlier, the company started focusing on car

manufacturing since beginning of 1950s. Right from the beginning, the company was

known for its innovation and was doing great business in the domestic market. But the

company soon realized that to expand significantly it needs to tap the global market

starting production facilities in different countries. Deciding to go global is not easy,

because it needs proper planning and training to sustain in a market which is completely

unknown to the managers. The company has to understand the tastes and preferences of

the customers, and has to have a sound knowledge of the country‟s legal issues and

business culture. Still there are enough reasons for Suzuki Motor Corporation to go

abroad.

The cars produced by the company are certainly of international standards. In the western

world there is high demand for cars. Being developed countries there will be chances of

making higher profit.

Page | 6

With economies of scale the production cost per car comes down. Serving bigger markets

can help the company in this way.

Though the Japanese market is quite big, still there is a chance of saturation in the market

lading to sharp decline in sales. To reduce the dependency on one market the company

decided to go abroad.

Going to developing countries have certain benefits. The cost of labor is low leading to

low production cost. This is why it entered several markets through joint ventures.

These are the main reasons why the company enterd global markets following a waterfall

approach.

Maruti Suzuki India Limited:

It is the leading four-wheeler automobile manufacturer in South Asia. Suzuki Motor

Corporation of Japan holds a majority stake in the company. It was the first company in

India to mass-produce and sell more than a million cars. It is largely credited for having

brought in an automobile revolution to India. It is the market leader in India and on 17

September 2007, Maruti Udyog was renamed Maruti Suzuki India Limited. The company

headquarter is in Gurgaon, Haryana.

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 objectives of - modernizing

the Indian automobile industry, producing fuel efficient vehicles to conserve scarce

resources and producing indigenous utility cars for the growing needs of the Indian

population. A license and a Joint Venture agreement were signed with the Suzuki Motor

Company of Japan in Oct 1983, by which Suzuki acquired 26% of the equity and agreed

to provide the latest technology as well as Japanese management practices. Suzuki was

preferred for the joint venture because of its track record in manufacturing and selling

small cars all over the world. There was an option in the agreement to raise Suzuki‟s

equity to 40%, which it exercised in 1987. Five years later, in 1992, Suzuki further

increased its equity to 50% turning Maruti into a non-government organization managed

on the lines of Japanese management practices.

Page | 7

Maruti created history by going into production in a record 13 months. Maruti is the

highest volume car manufacturer in Asia, outside Japan and Korea, having produced over

5 million vehicles by May 2005. Maruti is one of the most successful automobile joint

ventures, and has made profits every year since inception till 2000-01.

Maruti‟s history of evolution can be examined in four phases: two phases during pre-

liberalization period (1983-86, 1986-1992) and two phases during post-liberalization

period (1992-97, 1997-2002), followed by the full privatization of Maruti in June 2003

with the launch of an initial public offering (IPO).The first phase started when Maruti

rolled out its first car in December 1983. During the initial years Maruti had a 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 Maruti‟s strength was

the wholehearted willingness of the Government of India to subscribe to Suzuki‟s

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. Maruti‟s 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 employee‟s future growth and prosperity is

totally dependent on the company‟s 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, creation of a customer-focused value proposition, a cogent

reason why the target market should buy the product.

Page | 8

(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 Maruti‟s culture approximated from the Japanese management practices.

In spite of being the market leader, Maruti has not been exempted by the stiff competition

posed by other important players. Over the years the competition has only intensified.

Not only from the incumbents and new entrants other competitive forces, other sources of

pressures are also putting pressure on this giant. The following diagram depicts the way

how different forces work on the company according to Porter’s model.

Threat from the new players: Increasing

Most of the major global players are present in the Indian market.

Financial strength assumes importance.

Access to distribution network is important.

Lower tariffs in post WTO may expose Indian companies to threat of imports.

Strength of

suppliers: Low

A large number of automotive components suppliers.

Automotive players are rationalizing their vendor base to achieve consistency in quality.

Rivalry within the

industry: High

There is keen competition in select segments (compact and mid size segments).

New multinational players may enter the market.

Strength of consumers:

Increasing

Increased awareness among consumers has increased expectations. Thus the ability to innovate is critical.

Product differentiation via new features, improved performance and after-sales support is critical.

Increased competitive intensity has limited the pricing power of manufacturers.

Threat from substitutes: Medium

With consumer preferences changing, inter product substitution is taking place (Mini cars are being replaced by compact or mid sized cars).

Page | 9

The Maruti 1000:

With the growth in economy, the Indian consumers’ preferences were slowly changing.

The market already had plenty of hatchbacks in the early 1990s. The market was still

dominated by Maruti 800. But at the right time Maruti was able to understand the pulse

of the market. The consumer was looking for an Indian mid-sized car and was ready to

spend a little bit extra for this. The Maruti 1000, made by Maruti Udyog was the first

ever contemporary sedan-type car launched in India. The car (which Suzuki sold in other

countries as the Cultus/Swift/Geo Metro with a 1.3 L or 1.6 L engine) was introduced in

India in October, 1990. Sold at Rs. 3.81 lakh, it was back then the costliest car released in

the Indian market. The 850 kilogram car came with a 970 cc engine whose output was

just 45bhp. Initially the consumers were very excited about the advent of a car which had

a look completely new to the Indian market. This “luxury” car was flooded with

application right from the beginning. But with time, the car was proved to be

underpowered and the engine was too weak for the car. The fuel efficiency was not

satisfactory for certain customers. From 1993, the sales started to decline after a steep rise

in the year 1991-92. In 1994 it was discontinued when an upgraded version of the car,

with more powerful engine, was released and renamed the Maruti Esteem.

Maruti Suzuki Esteem

Maruti Esteem replaced the Maruti 1000 in 1994 after detection of some shortcomings of

the Maruti 1000. Though it was actually an upgraded version, Maruti decided to market it

as a completely new offer to the Indian consumers.

A Few Features of Esteem:

What set Maruti cars apart from its competitors at that time was firstly the fact that such

high performance vehicles were offered at very competitive prices which seemed to

attract a considerable number of people with a limited budget. By that time Maruti cars

were known to be highly fuel efficient and needed low maintenance cost and as far as the

price conscious Indian customers are concerned this was a key factor in determining the

worth of a car.

The car was available in a number of variants such as the Esteem LX, LXi and the top of

the line VXi. The source of power for the vehicle is its 4 inline cylinder 16 valve petrol

engine that gives a displacement of 1298 cc. This engine is set to give a decent maximum

Page | 10

power and a respectable torque. The set of suspensions on the Maruti Esteem give it

flexible maneuvering and stability. This has made a really versatile car that can be taken

on cross city road trips as well as inner city traffic. The car can easily fit in five adults

with utmost comfort and adequate leg room for each. The front seats can recline and

slight to get into the best position. The car also featured a boot light and a factory fitted

air conditioner to keep things cool and a heater to warm up in the winters. It also came

with power windows and remote operated fuel tank lid and trunk lid. The power was

considerably more than its predecessor, 85bhp @ 6000rpm.

The followings are some striking features in Esteem some of which were there from the

very beginning and some were added in later versions.

Chrome plated front grille

Tubeless tires

Body colored bumpers

Pockets on both front doors and front seats‟ back

Convenient lighting system in centre, driver's cabin and trunk

Power steering (in LXi & VXi variants only)

Plush fabric upholstery

Molded floor carpets

Maruti esteem was available in various colors,

Superior White

Silky Silver Metallic

Icy Blue Metallic

Metallic Wine Red

Metallic Pearl Silver

Midnight Black Metallic

Identifying the segment:

The first and foremost challenge for Maruti was to identify the group of customers who

share similar sets of wants and need and share similar tastes and preferences. To identify

the potential customers for Maruti Esteem the market had to be properly segmented. The

Indian market can be categorized under clustered preferences as far as cars are

concerned. There are separate segments ranging from a vast customer base wanting to

own a Maruti 800 to a small customers residing in a niche wanting to own an Audi or

Page | 11

BMW. Maruti has positioned itself intending to serve the larger segments in terms of

number of potential customers.

In the above diagram, the Indian car market is segmented based on the price of cars.

Actually the basis of this segmentation is the disposable income of the consumers and

their potential to spend on a car. The potential customers differ in each segment. But in

any two adjacent segments are not completely separated. Any two neighborhood

segments overlap because the potential customers at the fringes may switch to any of the

segments and can buy a car which is priced either on the higher side of the lower price

segment or on the lower side of the higher priced segment. This switching is mainly a

trade-off between the requirements and the price. In Indian scenario as the prices go up,

the potential customer base goes down.

Cars priced up to

~ 5 lakh

Cars priced between ~5

& 10 lakh

Cars priced between

~10 & 20 lakh

Cars priced between

~20 & 30 lakh

Cars priced between

~30 & 40 lakh

Cars priced

between 40 & 50

lakh

Maruti

ESTEEM

Cars priced

over 50 lakh

Page | 12

The segment served by Maruti Suzuki is portrayed in the above diagram. The company

positioned its car, Esteem in the 2nd

segment. It is one of the lower priced cars in the 5-10

lakh segment. With the advent of Esteem, people who were looking for a mid-sized car

but had to be satisfied with a smaller car, were able stretch their budget a little bit to

switch to the new segment to buy Esteem to meet their needs.

The car was targeted mainly to families with 4-6 members. This family car was

advertised as big car as it can accommodate 6 persons including the driver. The potential

customers belonged to the educated people of the society and with family income of

middle to upper-middle class standard.

Pricing:

Indian consumers are very price sensitive. This is the reason why price elasticity is so

high in the car market. For this reason, Esteem was priced so low, so that customers do

not feel apprehensive to buy car belonging to the higher segment. Though at the time of

launch, there were no direct competitors, eyeing to the future entry of lots of sedans,

Esteem was priced just to surpass the breakeven point. The C segment car was priced at

Rs. 5-6.10 (ex-showroom), much affordable for an upper-middle class family.

Product Life Cycle:

Maruti Suzuki Esteem was launched in the year 1994. The first of its kind in India,

Esteem witnessed a steep growth facilitated by the faith of the Indian customer on the

Maruti brand. When it was slowly phased out and the production was terminated on

December 2007, it raised many eyebrows because Esteem had been one of the most

trusted names in Indian passenger car market. The main reason cited by many analysts,

for it being phased out was loss of appeal to the changing customer perceptions. It was in

the market for about 14 years and its sales have fluctuated a lot at different phases of its

life cycle. The table summarizes the number of units sold of Maruti Esteem in the Indian

market.

Page | 13

Sales Figures of Maruti Suzuki Esteem:

Financial Year Number of Units Sold

1994-95 11000

1995-96 30000

1996-97 23000

1997-98 17000

1998-99 16000

1999-00 16000

2000-01 11000

2001-02 12000

2002-03 11000

2003-04 11000

2004-05 21000

2005-06 21000

2006-07 23000

2007-08 18000

Page | 14

Product Life Cycle Curve:

Page | 15

Introduction Stage:

Maruti has always been an anticipative marketer. It rightly anticipated the Indian market

and knew what this market will be looking for in near future. In 1994 this market leader

came up with yet another innovative offering for the Indian consumers in the name of

Maruti Esteem. Esteem was actually the rebadged version of already existing Suzuki

Cultus, but was new to the Indian market.

Ansoff Matrix

Existing Products New Products

Existing

Markets

Market Penetration

Product Development

New

Markets

Market Development

Diversification

In the form of Esteem a new product was offered in the existing market; this places the

product in the Product Development Strategy quadrant of the Ansoff Matrix. The main

goal was to make Esteem secure a distinctive place in the minds of the target customers.

As stated earlier, the features in Esteem were certainly unique at the time of its launch.

Thus it was able to create a Point-of -Difference and the customers were able to strongly

relate to the name Esteem and they knew that there is nothing available in the market

which can compete with its uniqueness. The challenge of creating a POD was

successfully executed by Maruti not only by product development but also by keeping its

price at an affordable level and made the customers feel that they can own something

they have dreamt about. To make the POD successful the consumers should be convinced

and must find the POD believable. Customers at the beginning were a little bit

Page | 16

apprehensive about Esteem because they knew that Maruti Esteem was an updated

version of Maruti 1000 which definitely had some shortcomings.

In the 1st year of launch, the sales were little above 11000 units. This was obvious

because during the introduction stage Esteem had to go past certain hurdles. First hurdle

was to deal with any technical problem. Only a few risk taking early adopters buy a car

as soon as it is rolled out, others fear of some technical difficulties during the introduction

stage. They wait for other users to use and give positive feedback. Esteem had to go

through the introduction phase to overcome this customer inertia. Filling the dealer

pipeline was not a major issue for the market leader because they already had a few cars

in the market doing business quite impressively. Maruti, even in the year 1994 enjoyed

brand equity. This was the main reason why this pioneer had to go through the

introduction phase only for one year. The scenario changed in the next year when the

sales grew rapidly.

Growth Stage I:

This stage followed the introduction stage and was typically marked by rapid climb in

sales. During the financial year 1994-95 the sales were constantly increasing in each

month and at the end of the year it stood tall at almost 30000 units.

The main reason for witnessing rapid growth and becoming a star product in such a short

time was overcoming customer inertia. Buying a car is a costly proposition. Only

commercial advertisement is not always very successful in attracting a customer enough

so that he buys the car, word of mouth communication channel plays a vital role. The

late adopters heard the positive feedback from the users about Esteem and also based on

their belief on the Maruti brand name people started buying the car.

To sustain its growth Maruti Esteem was being promoted quite aggressively. The target

customers of Esteem were educated families. The penetration level of television is high

in this segment. Esteem reached a broad spectrum of their target customers with this most

powerful advertising medium. Magazines and newspapers can provide much detailed

product information and was very appealing to the educated customer base. As the

product was new, detailed information was much needed and the print media

successfully fulfilled the need.

The growth stage was reached earlier than anticipated. Marui, at this stage did not adopt

any specific strategy to boost up sales. Though during this stage Esteem did not come up

Page | 17

with any of its new variants or any attractive offer, the sales were high serving the huge

customer base.

Decline Stage I:

Just like the unprecedented growth, the decline was also not expected so quickly. In the

very next financial year i.e. in the year 1996-97 the sales were down by about 25% to just

below 23000. In the following years the sales continued to drop until it reached 11000 in

2000-01.

Decline phase was a result of Esteem‟s entry into the Competitive Turbulence phase.

From the year 1995 to 2000, host of new entrants started their business in this market.

Most of the leading global players entered India attracted by the growing market. Also

the success of Suzuki itself gave confidence to other players.

ESTEEM

Opel Corsa

Opel Astra Mitsubishi

Lancer

Ford Ikon

Honda City

Honda Accord

Honda Civic

Hyudai Santro

Daewoo Cielo

Hyundai Accent

Page | 18

The diagram shows some of the tough competitors hindering the growth of Maruti

Esteem. Though all the cars did not belong to its segment they posed tough competition.

The Indian customers were exposed to host of world class car makers like General

Motors (entry 1994), Ford (1995), Honda (1995), Hyundai (1996), Toyota (1997), Fiat

(1997) etc. These cars started rolling out cars belonging to all segments. The sedan,

which was provided by Maruti only in the form of Esteem, was being now produced by

auto giants of different nations. The high profile launch of Ford Ikon and Hyundai Accent

took the gas out of Esteem. The entry of the fully loaded Tata Indigo also made the life of

this brand very difficult. The car from its position as a market leader in the C segment

became “An entry level sedan". The launch of Baleno in the segment further weakened

the position of Esteem in the hierarchy. Baleno was launched at the premium end of the

segment but the price cut and dealer offers put Baleno at the same league as the Esteem

which led to cannibalism. As time went ahead, the affordability of Indians also increased

and they were ready to pay more to own a car of a company of stature like Honda or GM.

In this shakeout stage esteem was struggling for survival because it had nothing new to

offer.

Maturity phase I:

The sales of Esteem in terms of units, did not change much during the financial years

2000-01 to 2003-04. Though the sales volumes did not change much, the revenue

generated came down. The reason for this was aggressive price cut to check the slump. In

2002 Maruti cut esteem price by Rs. 40000. Though this was not enough to increase the

sales volume, the product seemed to mature at this low level.

Esteems upgradation in year 2000, when it received an all-aluminum 1300cc MPFI

engine was unable to make any difference. Seeing gradually declining sales Maruti

Udyog introduced a diesel engine option for the Esteem saloon in 2002. This effort went

in vein as well. With sales touching the low of 11000 units which was same as the

introduction level sales, the challenge in front of the company was to decide weather to

continue with the product or to phase it out. At that point of time, Indian scenario was

such that market penetration index was low indicating potential for substantial growth

potential. The company, eyeing the market potential, decided to retain the product in the

Page | 19

market. During this stage Maruti sensed that it is slowly losing its Point-of-difference and

becoming just another car. Esteem lost its appeal and was no more recognizable in the

midst of more attractive looking and modernized sedans. Maruti felt the need to invest in

R&D for betterment of Esteem. It again started to invest in advertisement. The effect of

these efforts was visible during the next year when Esteem appeared in a completely new

avatar. This sea change was brought about for the first time in 10 years since its launch.

Growth Stage II:

Esteem was a good package; hence the company was not sure as to the USP or the Point

of Differentiation. Whether it was power or comfort or looks or quality, this confusion

was evident in the ads of Esteem during the nineties and early in the new millennium.

While the competing brands had their own USP's

Ford Ikon focused on Power

Indigo on Value

Fiesta on Looks etc.

the confused positioning diluted the brand equity of Esteem and made it look like a

second cousin to Ford Ikon. The value proposition of Esteem was challenged by Indigo

and the overall comfort and drive quality was challenged by Hyundai Accent.

2004 saw the reincarnation of Esteem .The entire car got a new look. Taking cues from

Baleno, the car was changed completely. The company embarked on a new positioning

“Fall in Love Again" on an emotional platform. The car looked better and was a welcome

change from the old much seen look of Esteem. Car market leader Maruti Udyog Limited

unveiled in Chennai the new, upgraded Esteem. It came in a refreshing new front styling,

with a new bonnet, multi-reflector clear headlamps, new bumper and new chrome grille.

The rear has been redesigned with multireflector, clear tail lamps and new boot garnish.

Besides, its plush new upholstery, silver finished dashboard garnish and controls, a

sportier speedometer, chrome-tipped parking lever and metal finished gear lever, made

for refined interiors. The new Esteem also came with tubeless tires unlike its previous

model. Unlike most of the western world, where variety in color of cars is not given

much importance by the car buyers, Indian consumers are always looking for attractive

colors in cars. The new Esteem was offered in a new metallic color: Fawn Mist. It

continued to be available in Silky Silver, Pearl Silver, Aqua Blue, Midnight Black and

Page | 20

Superior White. Maruti engineers have worked closely with suppliers to improve

productivity and quality, resulting in this delightful deal to the compact sedan customer.

The new look was quite successful and was able to boost sales to 21000 units in 2004-05

up by about 90% from the previous financial year.

Maturity Stage II:

During the financial years 2004-05 to 2006-07, the sales did not change much and can be

reasonably identified as the 2nd

maturity stage. Even at this

stage the level of competition was high and to remain active in

the market Esteem had to be promoted constantly. Esteem

changed its strategy of promotion as “Fall in Love Again"

because much time has passed since the appearance of the new

look of Esteem. 2005-2006 saw the brand striking the “Big

Idea" .The new positioning was formulated. The brand was a

Big Car-- Big on mileage, Big on Power etc. The campaign had

the common theme of a father and daughter with the daughter

discovering the “Bigness” of the new esteem. The brand was

now revealing its true self. The tagline says “Welcome to the Big World”. This

promotion push helped Esteem to retain its sales.

Decline Stage II:

Dilemmas such as maintenance, spare part availability, service competitions reaction in

filling the market gap are some issues that increase the complexity of the decision process

to withdraw a product from the market. Often companies retain a high price policy for

the declining products that increase the profit margin and gradually discourage the “few”

loyal remaining customers from buying it. Though Maruti was not into a price hike, it

slowly moved its focus from Esteem. This is because of the fact that it was becoming

impossible to sustain in the market with such an old car when market was still flooded

with new offerings from competitors.

Page | 21

Along with the competitors mentioned in the previous diagram, some new competitive

cars posed threat to the existence of Esteem.

Maruti decided to discontinue its production from December 2007 and was continuing

sales till stocks lasted in 2008. Maruti finalized the decision by making announcement

that it was going to replace Maruti Esteem by Maruti Swift Dezire. With this an era of

first luxury car of India ended.

Conclusion:

There are some major product life cycle management techniques that can be used to

optimize a product‟s revenues in respect to its position into a market and its life cycle.

These techniques are mainly marketing or management strategies that are used by most

companies worldwide and include the know-how of product upgrade, replacement and

termination. To comprehend these strategies one must first make a theoretical analysis of

the model of product life cycle.

The Product Life Cycle of Maruti Suzuki Esteem shows a very short introduction stage, a

steep growth and then a sharp decline before reaching maturity at a low level. It again

showed a growth to a lesser extent than the previous one, then a maturity period lasting

ESTEEM

Chevrolet

Aveo

Fiat

Petra

Ford

Fiesta

Hyundai

Verna

Chevrolet

Optra

Tata

Indigo

Page | 22

for a shorter period than the previous one and lastly declined before being out of the

market. The 1st half of the life cycle of this product resembles a standard Growth-Slump-

Maturity pattern. But the presence of a second cycle with all of the stages with smaller

magnitude and duration indicates that this product life cycle can also be categorized

under a standard Cycle-Recycle pattern.

The analysis of the Product Life Cycle showed us how a company can manage its product

and depending on the stage of the product in the PLC decides product strategy to be

competitive in the market as well as withdrawing it from the market when the product

does not add value to the company.

Page | 23