Car Segments Maruti Suzuki Portfolio Strategies (Marketing and

Promotion) Competition

Source: World Bank, Provided by GAIL India Ltd. (2001-02)

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

MUL launched its first car Maruti800 on MUL launched its first car Maruti800 on December 14,1983 at initial price of Rs. December 14,1983 at initial price of Rs. 47,500.47,500.

Suzuki Motor Company was chosen from seven prospective partners worldwide. This was due not only to their undisputed leadership in small cars but also to their commitment to actively bring to MUL contemporary technology and Japanese management practices . A license and a Joint Venture agreement was signed between Govt of India and Suzuki Motor Company (now Suzuki Motor Corporation of Japan) in Oct 1982

Suzuki brought efficient management practices,better technology and administration.

Initially Suzuki held the 26% stake in Maruti Suzuki .

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Maruti was the first company in India which studied the consumer demand and responded to it well.

Market segmentation policy was adopted that targeted different type of consumers with different type of models.

Maruti800 targeted medium income group, while the deluxe model targeted rich income group.

Maruti van targeted businessmen and doctors(ambulance)

The Gypsy targeted the paramilitary forces and the police.

This resulted in complete control of maruti over the market .

The company advertised its different products according to costumers e.g- maruti van was rechristened as Omni .

A special cell was made to make direct dealing of Gypsy with the government & the army.

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The MUL depended more on its M800 model, so when in late 1990’s the new players like when Matiz, Santro and Indica came into the market with more space and better comfort ,at same price, then Maruti lost a major share of market.

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After year 2000,(and 2003 to be more precise)there was a change in automobile market which where due to-

1. The government has reduced regulation on the industry and more foreign players were invited.

2. Banks and other financing companies started providing car loans at reasonable interest rate

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The Indian consumer now started buying the mid-size cars rather than small cars ,the luxury cars also gained popularity,SUV’s also started coming in the market.

The increasing level of income of urban people ,the small cars were not considered to be luxury item any more.

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To gain back its lost share Maruti launched Zen ,Alto and WagonR.These small segment car gained huge response for consumers.

Maruti also launched aggressive promotional policy to promote them like announcing Zen as the “world’s car”.

Maruti also made a slogan “count on us". To emphasize its reliability

In 2003 maruti came up with “change your life campaign” ,it provided vehicle insurance at just Rs 1 to attract the customers.

advertisement such as of Alto in which a small boy says to his father ”papa ki karan petrol khatam hi nahi honda” was make customer feel that Alto was best fuel efficient.

During 2003 and 2004, MUL visualized and implemented a strategy for its dealers to increase their profitability levels in view of increased competition. According to the strategy, the 300-odd dealers of the company were asked to strengthen their manpower, increase the salaries of their sales agents, and offer them better incentives.

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During 2003 and 2004, MUL visualized and implemented a strategy for its dealers to increase their profitability levels in view of increased competition. According to the strategy, the 300-odd dealers of the company were asked to strengthen their manpower, increase the salaries of their sales agents, and offer them better incentives.

'2599' offer-In 2004, MUL introduced the '2599' offer under which a consumer could buy an M-800 by paying an EMI of Rs 2,599 only, for a period of seven years. The down payment was fixed at Rs 40,000. MUL entered into an agreement with the State Bank of India (SBI), the largest bank in India, to promote this scheme

'Teacher Plus' scheme-To further penetrate into the market, MUL continued to focus its efforts on the rural markets and specific target groups. In 2004, it introduced the 'Teacher plus' scheme, in a tie-up with SBI, aimed at teachers who were interested in buying a new car.

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Segment

Price Range Cars

A < 3.0 lacs Maruti Alto 800, Omni , EON

B 3.0 -5.0 lacs Wagon R, Zen, Versa, Hyundai i10, Chevrolet Spark,Ritz, Tata Indica, Indigo

C 5.0 -10.0 lacs Swift, i20, Honda City, Polo, Innova, Sx4

D 10.0 -15.0 lacs Hyundai Verna , Civic, Octavia

E 15.0 – 30.0 lacs Honda CRV, Hyundai Sonata, Honda Accord, Maruti Suzuki Kizashi

http://www.surfindia.com/automobile/automobile-industry.html

The Journal of Business Perspective, Vol 10, No 1: Jan - Mar 2006

The Maruti 800, has gone beyond just a car, it has actually changed the lives and lifestyles of countless people, by bringing the joy of motoring to millions across the length and breadth of the country

The alto is a great combination of economy , practicality and styling. A runaway success on the roads of Europe, it exemplifies the benchmark in build, quality and reliability in a compact car. This is testified by the 24-hour endurance record set on Aug 03, 2003 of covering 3082 kms in 24 hours at an average speed of 128kmph.

The Omni is truly India’s original Multipurpose vehicle. Today it is available in 6 Avtars – 5 Seater, 8 Seater, Cargo, Ambulance, CNG and LPG. It meets diverse needs across different user segments and can double up both as a people carrier and a goods carrier. This faithful workhorse is easy on the pocket, yet tough on the job.

A Spanish expression for Style, the new Zen Estillo stands true to its name. Its aerodynamic body, unique bean shape, sparkling colors and snazzy lights will rev up your style quotient. An amazing blend of style and substance, its agile nature will leave you enthralled.

Drive with complete peace of mind. The word-class safety features of the wagonR keep you safe and secure, always. Wearing new vibrant colors, the new wagonR is full of freshness and energy to keep you charged up and always to go.

76% of Maruti cars are financed

44% through Maruti Finance, 12 % through SBI and associate banks

In year 2006-07, it added Mahindra Finance, Magma Leasing , Cholamandalam and Axis Bank.

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Se

gm

en

t A

Se

gm

en

t B

Se

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t C

0

25

50

75

100FY10 FY11

Segment A:Maruti Alto, Omni

Segment B:Zen, Ritz, Wagon R

Segment C:Swift, SX4, Swife Dzire

Maruti Astar Omni Alto WagonR Swift Zen Ritz Estilo Versa SX4  Grand Vitara

+i10 rated “Best Small Car” in JD Power Asia Pacific Initial Quality and APPEAL studies.

+ European styling , power-assisted brakes, advanced suspension system and uniquely responsive engine.

+ Celebrity endorsed (Shahrukh Khan and Preity Zinta).+ Hyundai had a national network of 300 sales and service outlets.- The spares are expensive than that of Maruti

- TATA INDICA

+ Car built for Indians by Indians+ Ambassador’s internal dimension and Maruti 800’s price with option of diesel

engine+ Has a sleek fascia with chrome lined grill, clear lens illumination, muscled

flares, flexible seating and electronic instrumentation with tachometer.+ Cheaper and home grown spares.+ Has lowest running cost (around Rs. 2.06 /km)

Chevrolet SparkGeneral Motors rolled out its small car Chevrolet Spark in India as it takes on

market leader Maruti Suzuki.

+ Rs 3.09 lakh (Ex-showroom Delhi) slightly lower than Maruti’s Zen Estillo base model. Improved cabin space 22

Dealer network across the countryA wide dealership network allows the company to service customers over a

wider geographical area than competitors. Currently, MUL has 500 sales outlets that cover 312 cities, as compared to 162 outlets of Hyundai Motors and 140 outlets of Tata Motors

B True Value Operations

MUL providing its customers an opportunity to resale their car to MUL or exchange with a new Maruti car under its “True Value” network has proven really beneficial. In FY07 True Value network touched 10000 units a month and more than 90% of that resulted in the exchange of a new car

C 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 modelsA presence

across various segments ensures that the company retains its existing customers by

offering them upgrades from its portfolio of models.

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Higher localization

it has rationalized vendors from 370 in 1999-00 to 225 in 2005-06 has resulted in MUL enjoying the highest operating margins amongst its peers

Commonality of platforms-

Commonality between the platforms of various models lead to lower product development efforts and higher benefits of economies of scale. Uses only two platforms

Strong support in R & D and Product from parent - MUL’s strength lies in the strong parentage of SMC, Japan. The Japanese SMC helps MUL in R&D and new model launches, as the Indian subsidiary contributes more than 25% of the parent net income. The company also has access to its parent's product portfolio, , which allows it to launch the latest products in domestic markets. Zen Estillo was launched in a very short period of nine months with support from the parent company.

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Increasing Productivity- MUL enjoys one of the best operating margins in its peer group at 13.6% and 10.7% at the net income level in FY10. The company has rationalised its work force, thereby reducing the man-hours spent in producing a vehicle by around 21% in the last 3 years. This has helped it to cut cost of producing per unit of vehicle.

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Maruti Suzuki is far behind in luxury and SUV car ,the other player like GM, TATA, Mahindra , Mitsubishi and Toyota are already established in the market ,so replacing them would not be easy.

MUL has been now emphasizing consistently on it’s “Best customer satisfaction” car to keep an psychological impact on costumers.

Advertisements targeting different segments

Promotional offers through out the years

Psychographics is used :• Wagon-R : Smarter people (executives)• Omni : People who need to transport goods• Alto : Small car : small family• Zen Estillo : Young trendy people

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The joint initiatives taken by Maruti and its team of suppliers have generated over 29% cost reduction over three years for Maruti

Less than 20 per cent of a car is manufactured in-house. The rest is accounted for by 215 suppliers and hundreds of second and third tier of vendors who, in turn, supply to them.

Maruti has launched two models Ertiga in 2012 and Alto 800 in 2012 ,these two models are facing intense competition from already established companies.

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