MARUTI SUZUKIBUSINESS LEVEL STRATEGY

Agenda

1. General Environmental Analysis2. Industry Environment Analysis3. Indian Automobile Industry4. Competitor Analysis5. Value Chain Analysis6. Business Level Strategy7. Conclusion

General Environmental AnalysisPESTLE

•Government promoting foreign investment (FDI’s) •Stable political environmentPolitical

(Attractive)

•Good access of funds due to availability of cheap loans •Persistent high growth rates for past few yearsEconomic

(Attractive)

•Rise of middle class leading to improved purchasing power•Mass transportation due to increase environment consciousness Social

(Moderate)

•Capital intensive•Huge investment required to achieve economy of scales Technology

(Unattractive)

•Need to comply with ever evolving emissions standards•Need to comply various safety and technical standardsLegal

(Unattractive)

Industry AnalysisPorter’s Five Forces

•Not very high due to proprietary knowledge, patents and government policies

•Huge investment required hence not easy to enter into automobile market

Threat of New Entrants(Low)

•Incentives to buyers in form of price discounts, accessories, after-sales services

•Lot of options available because of lot of competition.

Bargaining Power of Buyers(Moderate)

•Presence of many substitute inputs•Cost of switching of suppliers highBargaining Power of Suppliers

(Moderate)

•High risk as there are many competitors offering similar products•Rapid Development of new technologies and hence constant threatThreat of Substitute Product

(High)

•High Industry concentration & fixed costs so competition among existing players

•Low switching cost from different kind of automobiles after initial investment by minor changes, facelift etc.

Rivalry Among Competitors(High)

Growth Trajectory of Indian Auto Industry

COMPETITOR ANALYSIS

Hyundai• Debut in 1998 with launch of Santro• By 2004 had 5 models, Santro, Accent, Sonata

and Elantra and Getz • In 2007 launched i10• Wide range along with alternate fuel options• 2nd largest car manufacturer in India

COMPETITOR ANALYSIS

Tata• 3rd Largest in Passenger Cars• Launched Indica in 1998• Acquired Jaguar and Land Rover brands ( 2008)• Launch of Nano in 2009• High Market share in diesel market• Labor Cost -9% of profit Through its subsidiaries,

machine tools and metal producing plants

COMPETITOR ANALYSIS

Volkswagen• Tagline- Das Auto meaning ‘The Car’ but luxury

models for the upper class in India• Entered with Skoda Brand in 2001 with current

range of Fabia , Laura, Octavia etc.• VW in India in 2007 with Passat and Jetta• Launched Polo in 2009• 120 dealerships across the country today• Focus on service and Customer satisfaction

COMPETITOR ANALYSIS

Chevrolet• Chevrolet :“For a Special Journey Called Life.”

with Optra in 2003• Launched Aveo, Optra SRV and Aveo U-VA • Chevrolet Spark in 2007 and Beat in 2010• Innovative schemes like the ‘Chevrolet Promise’

-Maintenance at a fixed cost for three year period

• Affordability at every stage

COMPETITOR ANALYSIS

Ford• Started in 1995 : JV with M&M• Launched Ikon in 1999• Entered the hatchback with Figo in 2010• Keen to take what they can from the positive

market conditions

COMPETITOR ANALYSIS

Emerging Trends• Focus on indigenization and Lower Costs• Increase dealer network • Target to tap growing middle class-4th Largest in

Purchasing Power Parity(PPP)• By 2050 Top Spot in Car Volumes• Local Manufacturing Plants• World class features at affordable prices

VALUE CHAIN ANALYSIS

VENDOR MARUTI SUZUKI DEALER CUSTOMER

FIRM INFRASTRUCTURE

HUMAN RESOURCE MANAGEMENT

TECHNOLOGY DEVELOPMENT

PROCUREMENT

INBOUND OPERATIONS OUTBOUND MARKETING SERVICES LOGISTICS LOGISTICS & SALES

Production Management System

MARGIN

Team building activities Variable- pay e-learning

Electronic Data Processing Data Management Software

Product Life Cycle Management Solution

Vendor quality system audits Maruti Center for Excellence Supplier Club

MARGIN

Partnership approach with all stakeholders

JIT

Effective Material Handling

Presence in 500 cities

with 1500+ distributors

True Value model

Maruti Finance

Anytime Maruti

Maruti on road

Sales operating Standards

Motor training Schools

Cashless insurance

Lean Manufact-

uring

Value Added Value Engg.

(VAVE)

Focus on Cost,

Quality & Safety

PRIMARY ACTIVITIES

INBOUND LOGISTICS

• Just-In-Time (pioneered by Toyota)

• Huge savings on inventory management costs

• Sound demand management system

• Implementation of Logistics improvement systems

•

OPERATIONS• Eliminates unnecessary costs

using Lean Manufacturing• Maintains constant prices by

using Value Added Value Engineering

• K-Engine (fuel efficient) Plant used in many models & well received by customers

• Manufacturing supremacy rests on ideals of

• Cost – each employee works as Costs Manager

• Quality - ‘Do it right first time’

• Safety- ‘Home or Work place: Safety takes first place’

OUTBOUND LOGISTICS

• Presence in 500 cities• 300+ distributors• 1600+ service stations• 16 warehouses• True value dealership

model• Decent margins to dealers

MARKETING & SALES

• Anytime Maruti - 24*7 toll-free helpline to attend to customer grievances

• Maruti On road- Maintenance & Repair services

• Maruti Finance – Car finance in 166 cities in partnership with SBI

• Free test drive to customers

SERVICE

• Sales Operation Standards (SOS) - Requirements in terms of infrastructure and workflow processes to be met at dealership

• Excellent after-sales service- 1600+ centers with detailed information on website

• Motor training schools• Cashless insurance- Inception of two

subsidiaries- Maruti Insurance Distributors Services Pvt. Ltd. & Maruti Insurance Brokers Pvt. Ltd.

•IT network links vendors across the country & keeps track of order and delivery status.

•Electronic Data Processing (EDP) Dep't. manages post-sales process & sales analysis.

•Styling & Engineering functions done in UGS’ NX solutions•Data Management Software maintains record of all

enquiries & provides timely reports on demand.

TECHNOLOGYDEVELOPMENT

•Reduced no. of vendors from 370 (2000) to 100 (2005)•Quality maintained by periodic quality system audits•Maruti Centre for Excellence (MACE) to share best

practices & increase competitiveness among suppliers•Guidance to suppliers on financial matters pertaining to

fund management, Basel III norms etc.•Supplier Club used as platform to discuss operational &

social issues between suppliers and top management

PROCUREMENT

SECONDARY ACTIVITIES

•Plants at Manesar & Gurgaon; 7600 employees•Partnership approach with all stakeholders•Annual General Meetings•IR Cell•Production Management System aimed at achieving manufacturing

supremacy through Japanese principles of 5S, 3G & 3K

FIRM INFRASTRUCTURE

•Major component of variable pay ensures alignment of employees with organization

•Innovation forms a core value & is highly encouraged•Company is treated as family with events like Parivar Milan & Family

Day•Maruti Recruitment System (MARS) comprising technical aptitude test

followed by technical & HR interview.•Classroom training is reinforced through e-learning modules•MSPIN issued to all employees

HUMAN RESOURCE

MANAGEMENT

How a Business level strategy is built

Capabilities Core Competencies

Business Level Strategy

CAPABILITIES OF MSIL

• Manufacturing and production technology• Understanding customer’s needs• Developing new designs and models of cars

which are fuel-efficient• Quality focus• Prompt service and customer satisfaction

CORE COMPETENCIES

• Pioneer in latest technology

• Lean Mfg• PMS• Quality Control

MANUFACTURING EXCELLENCE

• Most extensive network in India

• Greater customer satisfaction

STRONG DISTRIBUTOR NETWORK

• Alliances with suppliers

• Alliances with dealers

FORWARD AND BACKWARD INTEGRATION

• True Value• Anytime Maruti

• Authorized service centers

• Insurance

OTHER CRM INITIATIVES

Whom to serve

What needs to

serve

How to serve these needs

BUSINESS LEVEL

STRATEGY

COMMON BUSINESS LEVEL STRATEGIES FOLLOWED BY FIRMS

Cost Leadership Differentiation

Focus cost leadership

Focus differentiation

Integrated Cost Leadership/Differen

tiation

Competitive Advantage

Cost Uniqueness

Com

petiti

ve S

cope

Nar

row

Targ

et

B

road

Targ

et

Maruti

Hyundai

Volkswagon

Toyota

Audi

Honda

Tata Motors

CHANGING TIMES…

PRE-LIBERALIZATION ERA – 1981- EARLY 1990S• Initial growth phase• World’s cheapest cars at just $5500• “Realize your dreams”• Maruti 800• Fuel efficient – 12-18 kmpl• 80% market share

POST LIBERALIZATION ERA – EARLY 1990S TO LATE 1990S• Entry of Tata Indica, Hyundai Santro and Daewoo Matiz • Liberalization woes – declining market share - < 50%• Lawsuit on non-conformance to emission norms• Labour strike• Stock prices fell drastically

THE REAWAKENING - EARLY 2000S TO 2009• Challenge 50 plan - Restructuring• IT in manufacturing, newer models at regular intervals, increasing capacity• Related diversification car finance, insurance, reselling• Grand success of Alto• 25.2% increase in sales, 200% increase in PAT• 55% market share• Move towards Integrated cost leadership/differentiation starts

RECENT TIMES – 2009 ONWARDS• Rs 18 billion investment - launching new models and upgrading plants• Largest passenger car company – 53% of total car market• Complete range of cars from entry level Maruti 800 and Alto, to hatchbacks Ritz, A

star, Swift, Wagon-R, Estillo and sedans DZire, SX4 and Sports Utility vehicles Grand Vitara, Kizashi

• Move towards Integrated cost leadership/differentiation almost complete• Multiple price ranges - low cost to luxury models

CONCLUSION• MSIL, through its cost leadership approach –

market leader for 3 decades , 50% market share.• Constant innovation to its processes, hence

helping it achieve efficiency. • Cost advantage by maintaining long term contracts

with its suppliers - reliable supply of materials• Moving towards Integrated cost

leadership/differentiation strategy to cater to changing demands of customers and changing environment

• Sustainability of this strategy in the long run