Maruti Suzuki Case Study

...

A major part of Maruti`s success is attributed to the brand name that it has created since its early inception. The Indian public has been the type which goes by the word of mouth. The more the number of vehicles of a brand seen on the roads, the more is the confidence in the brand this establishes its reliability with affordability. Maruti`s connect with the customer owing to its early establishment is still very strong in India. As most of the car buying population belongs to the middle class, Maruti has targeted and placed maximum number of its offerings in car models under 5 Lakhs.

Maruti also has played on cost leadership by maintaining the Lowest Total Cost of Operation by making use of advanced technologies in IT and thereby reducing costs by 30% and increasing their productivity by 50%. They have a wide availability of service centres (1567 centres across 1000 cities) placed in locations which are not easily accessible and have the service mechanics which understand the structure in large numbers. Maruti vehicles also rank highest amongst the best in fuel mileage mostly owing to the light body weight of its models. Their strength lies in their value for proposition by targeting the right markets and placing the cars suitable for the Indian roads at low maintenance cost and high resale value which feeds the appetite of the Indian Mob for their returns on investment.

They have made strategic decisions to be highly customer oriented by increasing the number of showroom outlets, trained sale executives, handling customer complain cell under the Customer Relationship Management department, loyalty programs and sustenance of dealership based on customer feedback. They realised the importance of vehicle maintenance, service market and conducted free service workshops to encourage consumers to come to their service stations.

As an organisation Maruti has built itself on strong work practices inherited by the Japanese, continuously worked on research and developed for contemporary technology, improved on their distribution channels and efficient after sales services. They have strict work and discipline for their employees, continuous improvement on labour policies hiring and sustaining the labour. High recognition and value for team work to the employee has increased labour productivity due to satisfied employees. Inspite of the 2012 mishap, Maruti has been able to recoup its status as an employer who caters to the labour needs and incentives without giving up on its principles.

Also, the Indo-Japanese hybrid leadership was a risky strategy but empowering Indians through the hybrid model has helped Maruti grow as an organisation. The Indian-Japanese pair-ups aimed to brought local understanding Instead of working in silos like in the past. They introduced a Suzuki like way to do business together in a non-hierarchical fashion.

STRATEGIC GAPS FOR MARUTI SUZUKI

The title “Maruti Suzuki ‘s Kizashi: A child born to the wrong mother?” is apt for the situation.

Increasing the portfolio of the models offered by Maruti- Suzuki launched “Kizashi”, marking the entry of Maruti in India Luxury Car segment. This was in line to meet the rising demand for luxury cars in the fast growing Indian market. The luxury sedan segment has 2.8 % of the total auto market in India. With the base model of Kizashi, priced at approx. 17 lacs, this was meant to compete directly the offering from Toyota, Honda & GM.

Maruti Suzuki always positioned itself as a company which cared about the customer's pockets and it always branded its cars as fuel efficient and cost effective. Advertisements like “Kitna deti hai”, "Petrol khatam hi nahi hota" & “service centres in every direction” make the point clear. But with the growing level of disposable income in the hands of Indian consumers and a complete change from being savings oriented to being spending oriented has brought about a luxury revolution of sorts. Every luxury brand conceivable like Louis Vuitton, Giorgio Armani, Swarovski, Rolex etc has a presence in India. As for automobiles like BMW, Mercedes, Ferrari, Audi, Porsche etc are making their presence felt in a big way. The luxury car market in India is too big at the present moment for Maruti Suzuki to ignore and hence their decision to launch Kizashi.

But this whole exercise has left a huge strategic gap in their functioning and will inherently lead to organizational problems:-

- Diverging from its core competency

- No trust car for people

- High competition in this segment

- Shift from delivering a cost efficient car to a luxury car

- Will have a higher maintenance cost compared to the lower maintenance cost of other Maruti Suzuki cars

Prevalent repercussions:-

- MSIL recently faced a decline in market share.

- MSIL products are now competing with products from Volkswagen (“Polo”), Ford (“Figo”).

- Launch of Hyundai’s cars at similar price range has further resulted in the decline of its sales

- Labour unrest.(Still recuperating from the Manesar Incident, in which an employee lost his life)

So we can conclude that Maruti will face huge competition by Hyundai, Volkswagen and China’s small segment cars. In mid-2000’s, Maruti, in smaller car segment, had its monopoly which they are losing due to this competition. They have actually reached their maturity level in this segment. So, either they need to diversify in another related Vehicle segment or need to innovate on their current strategy.

Maruti Suzuki should diversify in segment other than smalls segment where they can use their core competencies. They should go for small fuel efficient trucks or can target any other segment. By this way they can use their own core competencies and can move to another segment to get competitive advantage.

EVOLUTION OF THE INDUSTRY IN THE SHORT TO MEDIUM TERM

To stay aware of the growing demand, a few vehicle creators have begun putting intensely in different fragments of the business amid the most recent of months. The business has pulled in FDI worth US$ 13.48 billion amid the period April 2000 to June 2015 (“Source: Department of Industrial Policy and Promotion (DIPP)”)

Some of the major