Maruthi Suzuki India Ltd | Analysis

Maruthi Suzuki India Ltd | Analysis Maruti Udyog Limited is a subsidiary of Suzuki Motor Corporation, the largest manufacturer of mini passenger vehicles in Japan in terms of sales volumes. Suzuki was also the eleventh largest vehicle manufacturer in the world and the fourth largest manufacturer in Japan in terms of worldwide sales volumes in 2000. Maruti was ranked twentieth in terms of worldwide sales volumes amongst vehicle manufacturers, and has been the largest passenger car manufacturer in India. In fiscal 2002, it had the highest sales volumes of 339,964 cars and a market share of 58.6%. Maruti has a diverse product range that includes ten basic models with over 50 variants, of which nine models are manufactured locally and one is imported from Suzuki. The company offers a wide range of cars across different segments. It offers 14 brands and over 150 variants Maruti 800, people movers, Omni and Eeco, international brands Alto, Alto-K10, A-star, WagonR, Swift, Ritz and Estilo, off-roader Gypsy, SUV Grand Vitara, sedans SX4 and Swift DZire In an environment friendly initiative, in August 2010 Maruti Suzuki introduced factory fitted CNG option on 5 models across vehicle segments. These include Eeco, Alto, Estilo, Wagon R and Sx4. (Maruti, 2011) Maruti (2011), Maruti Suzuki Ltd website. Available at: http://www.marutisuzuki.com/about-us.aspx (Accessed: 21 March 2011) Maruti Suzuki India Limited, the countrys largest car manufacturer today rolled out its 1 Crore (ten millionth) car on March 15th 2011. The historic 1 Crore car, a Metallic Breeze Blue coloured WagonR VXi (Chassis No 243899) rolled out from the Companys Gurgaon plant. With this landmark achievement, Maruti Suzuki becomes the only Indian car company that makes its entry into the select club of automobile manufacturers across the globe who have crossed this milestone. (Maruti, 2011) Maruti (2011), Maruti Suzuki Ltd website. Available at: http://www.marutisuzuki.com/Maruti-Suzuki-rolls-out-its-1-Crore-Ten-Millionth-car.aspx (Accessed: 21 March 2011) Over the quarter century of its existence, Maruti Suzukis contribution as the growth engine for the Indian automobile industry is widely acknowledged. Maruti Suzuki has impacted the lifestyle and psyche of an entire generation of Indian middle class through the quality of its products and services that are in direct sync with the needs of the Indian populace. (Maruti, 2011) Maruti (2011), Maruti Suzuki Ltd website. Available at: http://www.marutisuzuki.com/maruti-dna.aspx (Accessed: 22 March 2011) Situational Analysis: Maruti Suzuki has a good market progress in automobile industry and has good sales performance from their own brand products. The current lineup is compromised of almost all Suzukis, including the Alto and the higher-end Swift and SX4. The company follows a partnership approach with its various stakeholders, and believes that the prosperity and wellbeing of the stakeholders will fuel the growth of the company in the future. (Maruti, 2011) Maruti (2011), Maruti Suzuki Ltd website. Available at: http://www.marutisuzuki.com/Stakeholders.aspx#h4 (Accessed: 21 March 2011) The company continue to enjoy a strength growth with Net Sales up by 1.3%, Operating Income up by 0.8% and Net Income up by 3.8%. The companys consolidated profit exceeded those of previous years with 103.2% increase of operating income and 105.4% of net income. (Maruti, 2011) Maruti (2011), Maruti Suzuki Ltd website. Available at: http://www.marutisuzuki.com/suzuki-motor-corporation.aspx (Accessed: 21 March 2011) Due to continuous demand, the company is planning on expanding its production by building new plants to cater customer needs, to reduce waiting period and to meet export demands. (Maruti, 2011) Maruti (2011), Maruti Suzuki Ltd website. Available at: http://www.marutisuzuki.com/Maruti-expansion-plan-in-final-lap.aspx (Accessed: 21 March 2011) Organizations Orientation Orientation: The process of receiving and welcoming an employee when an employee when he first joins a company and giving him the basic information to settle down quickly and start work. -Armstrong, Micheal. A Handbook of human resource management practice. Kogan page limited, 1999. Types Of Orientation: Product Orientation Production Orientation Sales Orientation Marketing Orientation Production Orientation: Production orientation is often a characteristic of organizations which have developed specific skills or technologies. It often involves manufacturing products in large quantities in order to minimize the costs of production. For Eg: The focus of the business is not the needs of the customer, but of reducing costs by mass production. By reaching economies of scale the business will maximize profits by reducing costs. Pg: 16 Marketing Principles and Practice Written By: Adcock, Dennis; Halborg, Al; Ross, Caroline Published By: Pearson Education UK Published In: 2001 Product Orientation: Production orientation is often a characteristic of organizations which have developed specific skills or technologies. It often involves manufacturing products in large quantities in order to minimize the costs of production. For Eg:- We produce excellent, well-designed, quality products which are great value for money. Customers are sure to want our products. Pg: 17 Marketing Principles and Practice Written By: Adcock, Dennis; Halborg, Al; Ross, Caroline Published By: Pearson Education UK Published In: 2001 Sales Orientation: Sales orientation dictates that a business must aggressively promote its products. As the product already exists, sales staff are made responsible for identifying every potential customer. This does not mean that sales representatives are customer-orientated, as that would involve starting with customer needs and not the product. For Eg:- The focus here is to make the product, and then try to sell it to the target market. However, the problem could be that consumers do not like what is being sold to them. Pg: 18 Marketing Principles and Practice Written By: Adcock, Dennis; Halborg, Al; Ross, Caroline Published By: Pearson Education UK Published In: 2001 Marketing Orientation: Kohli and Jaworski (1990) defined market orientation in the following terms: A market orientation entails (1) One or more departments engaging in activities geared toward developing an understanding of customers current and future needs and the factors affecting them (2) Sharing of this understanding across departments (3) The various departments engaging in activities designed to meet select customer needs. In other words, a market orientation refers to the organization-wide generation, dissemination, and responsiveness to market intelligence. Page no:8 Book name: Marketing Strategy and Competitive Positioning Written By Hooley, Graham J.; Saunders, John A.; Piercy, Nigel F.; Nicoulaud, Brigitte Published By Pearson Education UK in 2008 MACRO ENVIRONMENT- EXTERNAL ANALYSIS PESTEL A technique for analyzing the general environment is called Pestel Analysis. Page 126 Management and Organisational Behaviour, Written by: Mullins, Laurie J. PublishedBy: PearsonEducationUK PublishedIn: 2005 MILEAN/ISBN:9786610601752 Pub e-EAN/ISBN: 9781405871716 Political Political Factors Impact on the industry Effect on Industry Growth Employment New development and demand for more skilled labours High skill job seekers may find it easy to get a job Taxation and Labour Law Increasing changes in the Taxes and increased regulation in labour law Due to increase tax, the company had to increase the product price and it needs effective labour law E commerce The Company opening up online purchasing opportunities Better chance for increase business and customer satisfaction Terrorism Increase in number of terrorism in recent years Affects the market growth and the economy of the company Conclusion: The political factor plays a vital role in the success of the organization. The political factor are the external issues which affect the growth of the organization. Factors like new government taxing and terrorism will have a drastic effect on growth of the organization. Economical: Economical Factors Impact on the industry Effect on Industry Growth Oil Price High import and export rate It causes increase in the product price Currency Tax Change in the exchange rate. Reducing Tax rates Due to constant change in the currency exchange rates, tax rates and the duty rates keeps changing. Economy High economic growth rate It influence and raise the demand and purchasing power. Interest and Inflation Rates Interest and Inflation rates are forecast to increase High interest and inflation rates will have a negative impact on organization growth Conclusion: High economic growth may increase the buying power of the people, but the ever increasing oil price will have an impact on the export and import of product along with problems caused by varying currency exchange rate. Social: Social Factors Impact on the industry Effect on Industry Growth Population Second most in population Skilled labour, among the lowest in the world Brand value Company has strong and well known brand name It attracts people easily Cricket World Cup, IPL etc Increase in tourism. Good opportunity for marketing and for the business to boom Conclusion: Huge population and ongoing Cricket world cup provides an excellent opportunity for business development and having a brand value is an added advantage. Technological: Technological Factors Impact on the industry Effect on Industry Growth Technology About 600,000 engineers pass out each year Enough man power for new development and innovation Secure online transaction Purchase and payment can be done in a secure way. It will be easy for vendors, customers etc to buy and to make payments Modernisation Emergence of Indian automobile market as a major hub for auto manufacturing and research More contribution to GDP, more profit, and brand value Conclusion: Technological changes such as cutting edge design, eco friendly infrastructure and online security will be beneficial for both the company and the customers. Environmental: Environmental Factors Impact on the industry Effect on Industry Growth Pollution Industry follows international standards on emission and safety More support from government. Waste Management Following industry norms One of the highlights of the Organization Conclusion: More efficient and eco friendly changes needs to be done regarding pollution control, but at the same time maintaining industry norms is the highlights of the company. Legal: Factors Impact on the industry Implications International Trade Company imports and exports products from different countries and also does business in many countries Different trade law in each country may affect the business. High import duty has to be paid. Government laws The company has to follow different rules in different countries to run business Some laws in certain countries may affect the business Deregulation/ Privatisation Increased regulation and privatisation of the industry Its an added advantage as it will give more growth opportunities on economic and technological front Micro Environment External Environment PORTERS Five Forces: The five force model of Porter is an outside-in business unit strategy tool that is used to make an analysis of the attractiveness(value) of an industry structure. Competitive Forces model Porter: Value Based Management website. Available at: http://www.valuebasedmanagement.net/methods_porter_five_forces.html ( Accessed on 21 March 2011) Porters Five Force Model: Threat to New Entrants: Factor Level of threat Implication Brand Low Maruti Suzuki has been in the industry for a long time, it commands most of the market share and has a strong brand name. Financial investment Low There is less chance of any new entrant to invest as much as Maruti Suzuki and perform well at the current market. Start up cost of new entrant is low. Competence Low Company shares a respectable market in India, its rare for new entrant to catch up Sales Low New entrants may sell their products at low prices but still Maruti Suzukis strong brand name attracts customers Conclusion: Maruti Suzuki has no or less threats from new entrants, because Maruti has established itself as a well known recognisible brand. It has a huge brand value and gained a good market position than any other player in the market. Threat of Substitutes: Factors Level of threat Implication Substitutes Medium There are many substitutes products but Maruti Suzuki products are efficient and cost effective. Importance of substitutes Medium There are not many products that are very efficient so their importance goes down Cost rate Low There are few substitutes that are efficient or reputable, still Maruti Suzuki has a foot hold in that position Conclusion: Though there are many Substitutes, Maruti Suzuki have gained a niche market position for itself but the product efficency in Maruti Suzuki is a concern. Bargaining power of the customers: Factor Level of threat Implication Quality of the product Medium When people look for high Quality product, price is also considered important. Competition High There are many Automobile Companies competing with Maruti Suzuki are so high in competition Differentiation products Medium Customers always look for new and efficient products Conclusion: Since Maruti Suzuki offers good quality and cost effective products with great services, customers usually dont consider features of the product so the level of threat is normally low when compared with other competitors in the market. Bargaining power of the suppliers Factors Level of threat Implication Price of suppliers Medium Prices of the product goes up as the demand increases. Power of suppliers Low Suppliers have to meet the customers needs to get orders in the future Political issues Medium Political issue are to be met by the suppliers Conclusion: There will be little or less threat as suppliers usually try to keep their customers happy. Competitive Rivalry Factors Level of threat Implication Brand identity High All Competitive companies such as TATA, Hyundai, Ford have good brand reputation in the market Company growth High Tough competition from other companies affect the growth Cost structure Medium Most of the companies maintain their cost of profit accordingly to the other competitors. Conclusion: There are products which may be considered as a competitor to Maruti Suzuki so the competitive rivalry among stores is high MARKET SEGMENTATION Dividing a market into distinct groups of buyers with different needs, characteristics or behaviour, who might require separate products or marketing mixes. Page 391, Principles of Marketing, Written by: Kotler, Philip; Wong, Veronica; Saunders, John; Armstrong, Gary Published by: Pearlson Education UK Published In: 2005 Pub e-EAN/ISBN: 9781405871358 Consumer Market: The variables used in segmenting consumer markets can be broadly grouped into three main classes: Background customer characteristics; Customer attitudes; Customer behaviour; The first two sets of characteristics concern the individuals predisposition to areas, where as the final set concerns actual behaviour in the market place. Page 274: Marketing Strategy and Competitive Positioning Written By: Hooley, Graham J.; Saunders, John A.; Piercy, Nigel F. Published By: Pearson Education UK in 2004 Segmentation Profile Psychographic Social Single , Married and Teenager Behaviour Outlook Faithfulness Usage rate Common users High faithfulness in the brand Environmentally concerned Product: Maruti Suzuki has a very wide range of products from small passenger cars to varying segments like sport, sedan, luxury. These are flagship product they offer: Maruti 800 Maruti Alto Maruti Alto K10 Maruti Astar Maruti Eeco Maruti Gypsy Maruti Omni Maruti Ritz Maruti SX4 Maruti Dezire Maruti Swift Maruti Grand Vitara Maruti Estilo Competitors Maruti Suzuki now faces stiff competition from about 3 to 4 major competitors in the market. Newly entered U.S auto makers like General Motors, Ford, Hyundai and local companies like Tata, Mahindra Mahindra are the main competitors of Maruti Suzuki. They also have a major portion in market share. High Quality Low Quality Brand Maruti Suzuki has been ranked Indias most Trusted Brand in Automobile Sector for the year 2010 by Indias leading Business newspaper The Economic Times. Maruti Suzuki has its own brand portfolio of about 14 brands (such as 800, AStar, Alto, Omni, Ritz etc) and exclusive brands like Desire, Swift etc Maruti (2011), Maruti Suzuki Ltd website. Available at: http://www.marutisuzuki.com/customer-delight.aspx (Accessed: 22 March 2011) Core Competence Core Competence of Maruti Suzuki is their famous brand value and their reputed products. Being one of the leading manufacturers in automotive industry, it has a strong national presence. INTERNAL AUDIT: Resources Audit: Physical Resource: -Three Production plant in INDIA One plant in New Delhi. Two plants in Gurgoan. Financial Resource: March10 March09 (Cr.) (Cr.) Total income 29,935.40 21,277.00 Expenditure 25,579.80 18,825.70 Operating Profit 3,737.90 1,903.70 EBITDA 4,355.60 2,451.30 EBIT 3,530.60 1,744.80 EBT 3,497.10 1,693.80 Profit and losses of the year 2,402.20 1,236.70 PAT 2,497.60 1,218.70 Dividend: Equity Dividend 173.30 101.10 Equity Dividend (%) 119.93 69.96 Shares in Issue (Lakhs) 2,889.10 2,889.10 EPS Annualized (Rs) 86.45 42.18 Source: http://economictimes.indiatimes.com/maruti-suzuki-indialtd/profitandlose/companyid-11890.cms Differentiation and Capabilities: Here 5Ms can be used to analyze the Differentiation and Capabilities of Maruti Suzuki Limited. Market: Maruti is one of the leading retailer in INDIA and it is also expanding its market by reaching out the Global customer through its Quality of Service and Product. Men (Human resource): Maruti has employee strength of about 7,600 which is an inclusive of Manufacturing division, Marketing, Sales, Service and Customer support as of March 2010. Source: http://www.marutisuzuki.com/about-us.aspx Money: Financial Resource: March10 March09 (Cr.) (Cr.) Total income 29,935.40 21,277.00 Expenditure 25,579.80 18,825.70 Operating Profit 3,737.90 1,903.70 EBITDA 4,355.60 2,451.30 EBIT 3,530.60 1,744.80 EBT 3,497.10 1,693.80 Profit and losses of the year 2,402.20 1,236.70 PAT 2,497.60 1,218.70 Dividend: Equity Dividend 173.30 101.10 Equity Dividend (%) 119.93 69.96 Shares in Issue (Lakhs) 2,889.10 2,889.10 EPS Annualized (Rs) 86.45 42.18 Machines: Physical Resource: -Three Production plant in INDIA One plant in New Delhi. Two plants in Gurgoan. Materials: Has strong presence in materials like Metals for the frames, copper in the electrical wiring, aluminum for the radiator and platinum, palladium and rhodium in the catalytic converter, Glass, Plastic, Rubber for tiers and lead is used in the battery. SWOT ANALYSIS: A SWOT analysis gives a summary of the strengths and weaknesses of the company together with the opportunities and threats it faces. Referred from: Principles of Marketing, Written By: Kotler, Philip; Wong, Veronica; Saunders, John; Armstrong, Gary. Published By: Pearson Education UK, Published In: 2005 MIL EAN/ISBN: 9786610601332 Pub e-EAN/ISBN: 9781405871358 STRENGTHS: Strengths High Brand Loyalty Strong financial resources Leading in niche market Larger investment Level of implication High High Low High B) WEAKNESS: Weakness High operation cost Threat from competitors Level of implication Medium High C) OPPURTUNITIES: Opportunities Market for all class people Support for Sports Model Internet sales Level of implication High Medium Medium D) THREATS: Threats Strong competition Decrease in sales Level of implication High Medium Conclusion: The strength of the organization lies in high quality products and the companys good financial resources. Though they do not have a particularly well suited market for their product, still they invest more on their products which is one of the strengths of Maruti. The weakness of Maruti lies in their high operations cost and the threat from the competitors. Maruti has to focus on the areas of product design and quick service to the customers. The Threat lies in the Strong competition and the increase in the sale of the products due to the competition. 7) MARKETING PLAN Ten steps to documenting your plan Begin with certain inevitable preliminaries (contents, contacts, definitions). Provide an executive summary. Set the scene by describing the business. Review the market, your competition and your market positioning. Explain your vision, mission and objectives. Describe your strategy. Explain your plans for developing your products and/or services. Set out your financial projections. Highlight the risks and opportunities. Reach a conclusion. Referred by: Definitive Business Plan, The: The Fast-Track to Intelligent Business Planning for Executives and Entrepreneurs. Written By: Stutely, Richard, Published By: Pearson Education UK, Published In: 2007 MIL EAN/ISBN: 9786611157036 Pub e-EAN/ISBN: 9781405893978 7.1) COMPANYS OBJECTIVES: Short term( 1 year) Long term (2-4 years) Increase the sale of high quality cars Space and product extension Increase the productivity To expand the business in various countries. To build high range of Sports car To build the world cheapest car. 7.2) STRATEGIES: Maruti has a clear strategy to increase the profit and grow in market share. The company has to plan, to achieve this by increase the sale with the existing customer, attract the new customers and moving into the new market. They have also planned to enhance the offers available through the companys website. And the company has decided to expand the business in different parts of the world with cost effective to sustain in the competitive world. 7.3) MARKETING MIX: PRODUCT: Product is an important term in business, where all company will produce product with better quality, but Maruti is concerned to produce products according to the demands of the customers, to make more efficient and effective in terms of fulfilling the customer needs. PRICE: Maruti have high price for premium products and for Sports model, where there is a range of products or services the pricing reflect the benefits of parts of the range. They also use value pricing during the times of recession and increased competition. Maruti also produces the low price products to attract the customers and for both upper middle class and middle class people. PROMOTION: The endorsement is with simple video . Making customer comfortable through test drive. Targeting people of all class. PEOPLE: Introducing services in a way that suits all range of peoples. They attract people using good promotion and retain the customers with good customer service and support. PLACE: Maruti Suzuki had 802 dealerships across 555 towns and cities in India. It has 906 dealer workshops and 1,834 Maruti Authorised Service Stations in 1,335 towns and cities. It has 30 Express Service Stations on 30 National Highways across 1,314 cities in India. 8) BUDGET BREAKDOWN: Countrys largest car maker Maruti Suzuki India (MSI) said it would consider taking different measures after April to protect its margins due to fluctuation in Japanese Yen, post the devastating earthquake and tsunami. For this month, we are completely protected. In fact, we are covered till April. Beyond that if Yen continues to appreciate, then we will have to take a call to counter it, MSI chief financial officer Ajay Seth said. The companys margins are affected whenever the yen appreciates, while it is beneficial if it depreciates. After the natural disaster that struck the island nation on March 11, the Japanese currency is quoted at about 81 yen against a US dollar compared to that of about 83 yen earlier. There is strong volatility going on at present, with yen appreciating as much as to 76 yen against a dollar recently. Market analysts pointed out that currency hedging is a strong possibility. Usually, Maruti hedges yen against the euro instead of rupee to mitigate the impact, an analyst with a leading brokerage firm, who asked not to be identified, said. On the component sourcing from Japan: Of our total raw material procurement, about 25 per cent are imported. Out of those imported parts, about 80 per cent are purchased in yen. During the October-December period last year, MSI spent Rs 6,959.03 crore in consumption of raw materials and components. It also paid Rs 460 crore as royalty in the quarter to its parent company Suzuki, which is about 5.5 per cent of MSIs total sales. The impact of Japans natural disaster on MSIs production, it will remain unaffected for some time till next month as the company has enough inventory of components. Besides the stock at the plants, getting some supplies, which will reach from Japan that started sailing just before the earthquake. Last week, the company had said it was assessing the possible impact of the natural calamity on its components import from Japan. Earlier, MSI had cancelled the celebrations for rolling out its 1,00,00,000th car in view of the catastrophe. Shares of MSI were trading at Rs 1,170.05 on the Bombay Stock Exchange during late afternoon trade, up 3.42 per cent from its previous close. SOURCE: http://profit.ndtv.com/news/show/maruti-gears-up-to-counter-yen-impact-on-margins-145852?pfrom=home-Business Biblography http://www.whatmakesagoodleader.com/macro-environment-analysis.html