Maruti Suzuki India Limited

International Business
Project

International Business Project

Maruti Suzuki India Limited Introduction: Suzuki Motor Corporation
Suzuki Motor Corporation is engaged in the designing and manufacturing of passenger cars, commercial vehicles, motorcycles, all-terrain vehicles (ATVs), outboard motors, and other products. It is headquartered in Hamamatsu City, Japan and employed 14,389 people as on March 31, 2012. It operates 134 subsidiaries and 37 affiliates across 23 countries worldwide. Geographically, the company operates in Japan, Asia, Europe, North America and others. The company recorded revenues of JPY 2,512,186 million ($31,904.8 million) during the financial year ended March 2012 (FY2012), a decrease of 3.7% as compared to FY2011. The operating profit of the company was JPY 119,304 million ($1,515.2 million) during FY2012, an increase of 11.6% over FY2011. The net profit was JPY 53,887 million ($684.4 million) in FY2012, an increase of 19.3% over FY2011. It is the world's #3 motorcycle manufacturer behind Honda and Yamaha. Suzuki's passenger car models include the Alto, Grand Vitara, Swift, Splash, and SX4. Its motorcycle products include cruiser, motocross, off road, scooter, street, and touring models, as well as ATVs. Suzuki Motor's non-vehicle products include outboard motors for boats and motorized wheelchairs. Japan accounts for nearly 40% of sales worldwide.

Some of the principal subsidiaries of Suzuki Motor Corporation are: o American Suzuki Motor Corporation (U.S.A.) o Suzuki Australia Pty. Ltd. o Suzuki Austria o Cambodia Suzuki Motor Co., Ltd. o Suzuki Canada Inc. o Suzuki Motor de Colombia S.A. o Suzuki France S.A o Suzuki International Europe GmbH (Germany) o Maruti Udyog Ltd. o Suzuki Motor Espaa

Maruti Suzuki India Limited:

Maruti Suzuki India Limited (MSIL, formerly known as Maruti Udyog Limited) is a subsidiary of Suzuki Motor Corporation, Japan. Maruti Suzuki has been the leader of the Indian car market for over two and a half decades. The company has two manufacturing facilities located at Gurgaon and Manesar, south of New Delhi, India. Both the facilities have a combined capability to produce over a 1.5 million (1,500,000) vehicles annually. The company plans to expand its manufacturing capacity to 1.75 million by 2013. The Company offers 15 brands and over 150 variants ranging from people's car Maruti 800 to the latest Life Utility Vehicle, Ertiga. The portfolio includes: Maruti 800 Alto Alto K10 A-star Estilo WagonR Ritz, Swift Swift DZire and SX4 among others 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. With this, Maruti Suzuki became the first company in India to introduce factory fitted CNG vehicles. In terms of number of cars produced and sold, the Company is the largest subsidiary of Suzuki Motor Corporation. Cumulatively, the Company has produced over 10 million vehicles since the roll out of its first vehicle on 14th December, 1983. Maruti Suzuki is the only Indian Company to have crossed the 10 million sales mark since its inception. In 2011-12, the company sold over 1.13 million vehicles including 1,27,379 units of exports. The Company employs over 9000 people (as on 31st March, 2012). Maruti Suzuki's sales and service network is the largest among car manufacturers in India. The Company has been rated first in customer satisfaction in the JD Power survey for 12 consecutive years. Besides serving the Indian market, Maruti Suzuki also exports cars to several countries in Europe, Asia, Latin America, Africa and Oceania The company is listed on Bombay Stock Exchange and National Stock Exchange.

Maruti Suzuki's revenue over the years: Year 2006-07 2007-08 2008-09 Net Sales 1,45,922 1,78,603 2,03,583 Year 2009-10 2010-11 2011-12 (Rs. in Million) Net Sales 3,01,198 3,58,490 3,47,059

Organizational Structure:

Shareholding Pattern of MSIL:

Promoter Group (Suzuki Motor Corp.) Public Shareholding a. Institutions b. Non Institutions Total 54.21%

37. 48% 8.31% 100%

Dealer-Service Centre Network:

Major cities Delhi Mumbai Chennai Kolkata Bangalore Hyderabad Dealer 13 12 8 7 9 6 Service stations 16 9 11 9 12 8

History of Maruti Suzuki India Limited (Timeline):

1970: The Indian Government launched a new car company called Maruti Technical Services Limited which created competition for the existing Ambassador Car Company.

1971: The Government changed the name of the company to Maruti Limited. Indira Gandhis son, Sanjay Gandhi became the managing director of the company.
1977: The Company was liquidated as a result of corruption. There was a Maruti Scandal in 1978 where the court issued a notice to Maruti. Sanjay Gandhi passed away.

1981: The Company was re-established when the founders mother, Indira Gandhi took charge. The Company was now called Maruti Udyog Limited. After partnership with Japanese giant Suzuki Motor Corporation in a Joint Venture Agreement, the company was called Maruti Suzuki Company. 1983: Maruti produced its first car, the Maruti 800. It took the company thirteen months to produce this car. This changed the landscape of the Indian car market as Maruti 800 was the most cost-effective and fuel-efficient car in India. 1984: Maruti produced a large mini-van called the Omni that seated up to eight people. This was an addition to its existing offering of the Maruti 800.

Between 1985 and 1995: Maruti launched the Gypsy, the Maruti 1000, the Zen, the Esteem, and the Maruti On Road Service, a 24-hour service which gives customers 24hour access to technicians and vans who are ready to help with any problem of the car round the clock. In 1987, the company made its first export sale, selling 500 cars to Hungary. 1996: This was a prominent year for Maruti as five new models of its cars were launched including the Gypsy (E), Omni (E), Gypsy King (E), the automatic Zen and the Esteem in a 1.3 litre engine. Gypsy has the engine from the Esteem. 2000: Maruti launched Indias first call center and the Altrura, a luxury car. It also introduced the 16-Valve MPFI G13BB engine in the Gypsy and the power increased to 80 bhp. 2002: The WagonR Pride, Esteem (diesel version), Alto Spin LXi were introduced. Maruti Finance was started diversifying the company from its initial product offering of only cars to finance. Maruti also inaugurated a childrens park in Delhi as part of its Corporate Social Responsibility Initiative. 2003: Maruti launched the Grand Vitara. 2005: Maruti launched the Swift. 2006: Maruti had produced up to six million cars.
2007: Indian Government sold its entire shares to financial institutions of India. On 17th September, Maruti Udyog Limited was named as the Maruti Suzuki India Limited.

2008: Maruti launched the Swift DZire, the A-Star and inaugurated the K-series engine plant in Gurgaon. 2009: The Company shipped the first batch of A-Star cars from the Mundra port.

Process of Internationalization

A brief outline of Maruti Udyog Limited prior to Suzuki Motors entry in India:
In 1969, the government approved Maruti Limited, a company started by Sanjay Gandhi to produce small passenger cars in Gurgaon, Delhi. About 120 hectares of land was acquired and 80,000 square meters of covered factory area was built. Although, the company started with great fanfare, it did not succeed to manufacture cars as planned. Finally, the company was liquidated in 1977. The Government of India by an Act of the Parliament acquired Maruti Limited in October 1980 and renamed the company as Maruti Udyog Limited (MUL).

After acquiring the loss making Maruti Limited, the Government of India established Maruti Udyog Limited (MUL) as a public sector company in February 1981 through the act of parliament. The management of MUL soon started its search for a foreign collaborator who could provide low cost fuel-efficient car engine of below 1000cc. Early in 1981, the Government of India invited nearly 11 large established automobile companies from UK, France, West Germany, Italy and Japan. Most of the foreign partners were highly pessimistic with the joint venture. However, Suzuki Motors attractive offer and its high speed of working turned itself to be the most favourable bidder finally and it won to be the partner of MUL. The agreement was ultimately finalized on October 2, 1982. Suzuki Motors also accepted the terms of the government in terms of its lower equity participation. General Motors and Ford Motors ceased their automobile operations in India when the government passed a law in 1953 requiring foreign car businesses to produce locally and to include local equity participation. Suzuki Motors Company agreed to 26% shareholding in MUL in 1982. Only after about six years it invested additional amounts to raise its equity to 40% in 1989 and then to 50% in 1992. Suzuki Motors investments in Maruti Udyog Limited:

Suzuki Motors not only invested more than a quarter of the capital in the joint venture with MUL, but also invested in many other automobile related businesses soon after its investment in MUL. This was because the Indian automobile industry had a poor infrastructure to manufacture high quality small cars when Suzuki Motors entered India. Suzuki Motors could have imported the car components to maintain the quality of the car it manufactured in India. However, it faced two great problems at this time. 1. Importing components from Japan would have driven-up the cost of the cars it manufactured. 2. It was bound by the Indian Governments policy to include local components in its production. Suzuki Motor invested extensively in the Indian component manufacturers to improve the quality of the components and to reduce the cost of its component procurement.

 Organizational Culture as part of Internationalization:

Suzuki Motors has not only invested capital in the Indian automobile industry; it has also deputed its own manpower in many of its joint ventures, both for manufacturing cars and for manufacturing components. Interestingly, Suzuki Motors has also deputed its employees in the factories of component manufacturers in India. Not only employees from Suzuki Motors from Japan were deputed in the companies of Indian partners but many Indian employees from Maruti Udyog Limited were sent to Japan every year for learning Suzuki Motors method of production, quality assurance and other Japanese management methods. After being trained on the Japanese management techniques, these Indian employees would carry back their learning to Maruti Udyog Limited in India. This process of training employees was an effective means of transfer of skills and techniques. Most of the features of Japanese management system such as Quality Circles, employee participation in the production decision making, production incentives, company union, and in-house training have been successfully transferred to the work culture of Maruti Suzuki.

Supply Chain Management at MSIL:

Maruti Suzuki is one of the most successful companies in terms of supply chain management in the Indian automobile market. The company has 246 local suppliers and 20 global ones functioning in a seamless manner. The company strictly receives their supplies ordered the previous night in a two hour slot the next day, which was a huge improvement from the initial 30-day supply period. Maruti was set up in the 80s, many of Suzukis global vendors set up joint ventures in the northern region. While setting up the plant the government had approved of manufacturing only on condition of localization of components. Maruti used this by scouting for entrepreneurs and turning them into vendors, facilitating loans, licenses, technical know-how and even location in a phased manner. Of the 246 suppliers, Maruti has joint ventures with 14 of them and hold strategic equity stake to have a say in production and quality issues. Maruti however was not satisfied with the delays in production due to the lag time in supplies. The company has adopted the Japanese system, Just In Time (JIT) to achieve higher operational efficiencies and reduce inventory carrying cost. Maruti Suzuki has adopted the e-Nagare system of electronic flow which has completely transformed its supplier chain. To achieve JIT material supplies, the company has given preference to locally based suppliers. Over 76% of the company's 246 suppliers are located within 100 kms of radius. They have strategically located the suppliers of bulky components such as instrument panels, fuel tanks, bumpers, seats, etc. adjacent to the company's manufacturing facilities in the Suppliers' Park. Maruti supports its vendors in all possible ways. This includes finding technology partners, giving financial, technical and management support and bringing transparency in its dealings. Of late Maruti has been collaborating with its suppliers to smooth HRD issues which had resulted in strikes and delays. Fifty four of the top eighty component suppliers of Maruti Suzuki India compete against each other in what has been called 'Quality Circle Competition', and the top three get a chance to present their cases in Suzuki's Japan facility alongside other global vendors. The idea behind the Quality Circle Competition was for the teams from different vendors to identify, discuss and resolve any one core business issue that will add value to the overall functioning of the company, thereby increasing overall efficiency

SWOT Analysis
Strengths Maruti Suzuki India limited is in a leadership position in the market with a market share close to 38% Maruti Suzuki India limited has the largest network of dealers and after sales service centres in the country. Various promotional strategies adopted by MSIL to transfer its thoughts to the people about its products. Strong Brand Value and Loyal Customer Base. Has good product lines satisfying the Indian customers in terms of initial price, cost of maintenance. Have many cars which top the list in the segment in which it operates. MSIL is the first automobile company to start second hand vehicle sales through its True-value entity.

Weaknesses Low interior quality inside the cars when compared to quality players like Hyundai and other new foreign players like Volkswagen, Nissan etc. The management and the companys labour unions are not in good terms. The recent strikes of the employees have slowed down production and in turn affecting sales. Maruti hasnt proved itself in SUV segment like other players.

Opportunities MSIL had launched its LPG version of Wagon R. MSIL can start R&D on electric cars for a much better substitute of the fuel. New DZire from Maruti will capture the low tax segment cars market. Export capacity of the company is giving new hopes in American and UK markets Economic growth of the country is constantly increasing and the government is working hard to increase the GDP to double digit.

Threats: Recent decline in market share. Major players like Maruti Suzuki, Hyundai and Tata has lost its market share due to many small players like Volkswagen- polo. Ford has shown a considerable increase in market share due to its Figo. Tata Motors recent launches like Nano 2012, Indigo e-cs are imposing major threats to its respective competitors segment

China may give a good competition as they are also planning to enter into Indian car segment Younger generations started getting a great affinity towards new foreign brands

Value Chain Analysis of MSIL:

(A) Primary activities at Maruti Suzuki (Operational) 1) Inbound Logistics: Inbound Logistics is the receiving and warehousing of raw materials and their distribution to manufacturing. Maruti Suzukis inputs primarily comprise raw materials and purchased components. The company has implemented tier-ization of suppliers and Just in Time supply logistics. 2) Operations: Transform inputs into final product form through machining, packaging, assembly, equipment maintenance, testing, printing and facility operations. 3) Outbound Logistics: Are the activities required to get the finished product to the customer, including collecting, storing, physically distributing, material handling, delivery vehicle operation, order processing and scheduling. 4) Marketing and Sales: Provide means by which buyers can purchase the product and inducing them to do so, such as advertising, promotion, sales force, quoting, channel selection, channel relations, and pricing. Marutis marketing objective is to continually offer the customer new products and services that:

1. Reduce the customers cost of ownership of our cars; and 2. Anticipate and address the customers needs and preferences in all aspects and stages of car ownership (MARUTI SUZUKI refers to this as the 360 degree customer experience) 5) Service: Aims at enhancing or maintaining the value of the product, such as installation, repair, training, parts supply, and product adjustment (B) Secondary activities at Maruti Suzuki (Supportive) 1) Procurement: The function of purchasing raw materials and other inputs used in the firms value creating activities 2) Technology Development: Technology development includes research and development, process automation, and other technology development used to support the value chain. a) Research & Development (R&D) b) Technology absorption, adaptation and innovation Kaizen - Maruti had adopted the Japanese management concept of Kaizen, or continuous improvement. The Kaizen activities had resulted in the improvement of the in-house capabilities. For example, they had manufactured 25 multi-axis robots and 16 multi-spot welders. 3) Human Resource Management: Activities associated with recruiting, training, development and compensation of employees. 4) Firm Infrastructure: Firm infrastructure consists of general management, planning, finance, accounting, legal, government affairs and quality management.

Michael Porters Five Forces Model

a) Threat of New Entrants: (Increasing) Although most of the major global players are present in the Indian market; few more are expected to enter due to the welcoming government policies and expected retaliation. b) Threat of Substitutes: (Low to Medium) Maruti Suzuki faces serious threat from consumer shifting to hybrid or electric cars. Currently, the electric car market in India is dominated by sole player Reva Electric Car Company. However brands like Tata Motors, Chevrolet and Nissan are also planning to launch their electric cars. c) Bargaining power of Supplier: (Low) Automakers are the key to the supply chain of the automotive industry. Maruti Suzuki has manufacturing units where engines are manufactured and parts supplied by first tier suppliers and second tier suppliers are assembled. There are a large number of automobile component suppliers whose switching costs are very high. Thus reducing the bargaining power of the suppliers d) Bargaining power of buyers: (Increasing) Today, consumers are considered kings in the automobile market. There is an increasing awareness among them and they are given a humongous number of choices. Buyers get incentives in the form of cost discounts and better after sales services. This further increases the bargaining power of the buyers. e) Competitive Rivalry: (High) Competition in certain segments is very high e.g., small and mid-car segment. Brands like Hyundai, Chevrolet, Tata and Skoda have given huge competition to Maruti Suzuki. In the recent past Volkswagen, Honda, Ford has also given competition to the premium car segment.

Core Competencies of MSIL:

1. Strong Customer Base & Brand image Maruti Suzuki India Limited has a market share of about 38% in the Indian passenger car segment and is the largest manufacturer of small cars in India. The company has been voted as first by Indian customers for level of customer service and customer satisfaction and has won numerous numbers of awards. The company manufactures affordable small cars which serve the needs of an average Indian customer faithfully and such a strong brand image and huge customer base can sustain the position of the company as the market leader in the Indian small car segment. 2. Well-developed sales and service network throughout India The Maruti Suzuki India has a strong dealership network consisting in more than 450 cities across India and a huge service network of more than 2750 franchises of service outlets spreading about 1300 cities throughout India. 3. Very Strong knowledge of Indian market The Maruti Suzuki India has a strong knowledge of the Indian market which has helped them to grow their sales and market share in India.