Maruti Suzuki Case Study

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- The level of interest rates

Interest rates can have a positive or a negative impact on the economy and their investments. Increased interest rates could lead to consumers not spending or borrowing money from financial institutions and this could have an impact on the economy and lead to recessions.

- Currency exchange rates

Price on imports and exports will increase or decrease depending on the depreciated rand.

- Price inflation

The rate of inflation determines the rate of remuneration for employees and directly affects the price of products needed.

- Sociocultural factors

There is no doubt that society is constantly changing and this has a great impact on the demand of products and service. Companies should focus on these changes by analysing the growth in population the age structure and lifestyle changes within the environment. Some examples which have an impact on the customer needs include: Lifestyles, religion and ethical beliefs, education, population growth, customer service and product quality. These factors focus on the forces within the society. Organisations should look into these changes in order to offer services and products which aims to benefit people’s lifestyles.

- Technological factors

Technological advancements have the power to change the way in which business is conducted. Managers should be aware and understand how these changes could affect their business. In order for organisations to be competitive, they need stay technological advanced. This factor includes the computerisation available in the current times. These factors have an impact on the cost, quality and scope of innovation of a product or service.

- SWOT Analysis

This is an analysis to determine the organisations strengths and weaknesses in terms of the organisations external threats and opportunities. The SWOT analysis of Maruti Suzuki will include the internal strengths and weaknesses of the company as well as their external opportunities and threats that the company is facing. Here is a SWOT analysis of Maruti Suzuki:

- Strengths

Maruti Suzuki is in a leadership position with 48.74% shares in the market place. One of their greatest strengths is their loyalty towards their customers and their strong brand value. Because of their huge network of dealers, Maruti Suzuki has one of the most after sales centres in the country.

- Weaknesses

The quality of Maruti Suzuki’s product interior is the lowest when comparing to some of their quality players, Nissan and Hyundai. In June 2011 Maruti Suzuki lost production on 16,000 cars due to a strike action. Maruti’s main focus thus far has been their small car segment and has left the luxury car market untouched.

- Opportunities

Maruti Suzuki has done extensive research and development on electric cars which could be a better substitute for fuel. The huge customer base in India makes it possible to reach out to different segments.

- Threats

The biggest threat to Maruti Suzuki has been globalization. Almost every automobile company is entering into the small car segment. Tata motors and Ford’s recent launch of small cars poses a great threat to Maruti’s competitor segment. China is also planning on entering the Indian car segment which poses a threat to Maruti Suzuki competitive advantage. One of the greatest threats was the decline in Maruti’s market shares which fell from 50.09% to 48.09%.

- Attractiveness of the Industry

According to Unisa study guide (2016) the purpose of defining an industry is to know who your customers and competitors are. A thorough and ongoing industry analysis is essential for any organisation when making strategic decisions within the industry (Louw and Venter, 2010:116). Crouch (2008: 57) underscores the need to appreciate the terms in which organisations compete, the clients they serve as well as other stakeholders whose actions can effect or are affected by the organisation and their preferences and sources of competitive advantages within the industry.

While the strongest competitive forces determines profitability within an industry and is the most important for strategy formulation, the most striking force may not always be obvious (Porter 2006). Five forces namely:

- Possibility of new entrants

- Bargaining power of clients and customers

- Bargaining power of suppliers

- Availability or non-availability of services

- Existing competitors

It is essential for organisations to understand their competition. Porter’s 5 forces framework was developed in 1979, and is used to examine the competitive structure of an industry. Porter’s 5 forces define whether an industry is attractive or unattractive from the perspective of a company competing in the industry.

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Figure 1: Porters Five Forces model of industry stakeholders and competitive forces (Comindwork, 2015)

Above is an image of Porter’s five force analysis. These forces affect each of the competitors within the industry. Each force of the external business environment is discussed below.

- Competitors in the industry environment.

According to Peet Venter, (2015) there are more than one competitor in the industry environment.

- Threat of new entrants

The threat of new entrants refers to threat that new competitors can pose to existing industries. Porter’s threat of new entrants reformed the way people look at competition in an industry. According to Peet Venter (2015) new entrants could increase the level of competition which will reduce profits for existing players and this threat exist in all industries. An industry’s attractiveness increases when there are barriers to enter. There are six entry barriers to put in place:

- Capital required – Capital investments required to start a business / machinery, R&D