N.E.S.

RATNAM COLLEGE OF ARTS, SCIENCE & COMMERCE

SUBJECT: - TURNAROUND MANAGEMENT TOPIC: STD.:TURNAROUND OF TVS - SUZUKI COMPANY. TYBCOM (BANKING AND INSURANCE)

SEMESTER :- VI

Submitted To: - Prof. Jia Makhija.

Submitted On : - 12/02/2014.

GROUP MEMBERS:-

Group members
HEMRAJANI SONAM KONAR GAYATRI SHARMA POOJA SINGH PINKY SAMOSHE POONAM

Roll. No 10 16 36 39 41

ACKNOWLEDGEMENT:
We are over whelmed in all humbleness and gratefulness to acknowledge our depth to acknowledge our depth to all those who have helped us to put these ideas, well above the level of simplicity and into something concrete. We are very thankful to our guide Prof.JIA MAKHIJA for her valuable help . She was always there to show us the right track when we needed her help. With the help of her valuable suggestions, guidance and encouragement, we were able to perform this project work. We would also like to thank our colleagues, who often helped and gave us support at critical junctures during the making to this project report .

HISTORY OF TVS SUZUKI COMPANY

TVS was established by Thirukkurungudi Vengaram Sundaram Iyengar. He began with Madurai's first bus service in 1911 and founded T.V.Sundaram Iyengar and Sons Limited, a company that consolidated its presence in the transportation business with a large fleet of trucks and buses under the name of Southern Roadways Limited. When he died in 1955 his sons took the company ahead with several forays in the automobile sector, including finance, insurance, and manufacture of two-wheelers, tiers and components. The group has managed to run 33 companies that account for a combined turnover of nearly $3 billion. TVS and Suzuki shared a 19 year long relationship that was aimed at technology transfer to enable design and manufacture of two-wheelers specifically for the Indian market. Rechristened TVS-Suzuki, the company brought out several models such as the Suzuki Samurai, Suzuki Shogun and Suzuki Fiero. Differences in opinion on how to run the join venture eventually led to the partners going their separate ways in 2001 with the company being renamed TVS Motor, relinquishing rights to use the Suzuki name. There was also a 30 month moratorium period during which Suzuki promised not to enter the Indian market with competing twowheelers.

INTRODUCTION ON TVS SUZUKI: -

Mr. Thirukkurungudi Venkata Sundaram (TVS) Iyengar was an industrialist, the founder of TV Sundaram Iyengar & Sons group of Companies. He established the T.V.Sundaram Iyengar and Sons Limited in 1923. The group diversified into 2 wheelers, automotive components, automotive spares, computer peripherals and financial services. TVS group was successful in automotive components and Two wheeler businesses. TVS Group emerged as Indias Third leading two wheeler manufacturers one among the top ten manufacturers of bikes. Some of the TVS Group companies are: TVS Motor Company, Sundaram Finance, Sundaram Motors, Sundaram Brake Linings, and TVS Logistics. TVS Group Business philosophy worked with Quality, Service, Reliability, Sense of Ethics.

TVS MOTORS:
TVS Motor Company Ltd. Is the flagship company of the TVS Group. TVS Motor was founded in 1978. TVS Motor Company is the first two-wheeler manufacturer in the world to be honored the Deming Prize for Total Quality Management.

Today, TVS Motor Company has, 4 manufacturing plants (Hosur in Tamilnadu, Mysore in Karnataka, Nalagarh in Himachal Pradesh India and Karawang - Indonesia) 16% market share in the two-wheeler industry in India Product offerings in all segments of the two-wheeler industry in India Product offerings for the three-wheeler industry in India More than 15 million customers Products exported to more than 50 countries worldwide

SUZUKI GROUP:
Suzuki dates back to 1903 when Michio Suzuki founded Suzuki Loom Work in Hamamatsu in Shizuoka, Japan. The company focused on the development and production of complex machines. In 1937, the company diversified into manufacturing cars for the Japanese market. In 1952, it manufactured its first motorized cycle called Power free. Suzuki entered India through TVS Suzuki joint venture, originally incorporated as Indian Motorcycles Pvt. Ltd. In 1982. The company came out with a public issue in 1984 and was named as TVS Suzuki. In the same year, the company launched its first 100-cc motorcycle, Ind Suzuki.

INITIAL SUFFERINGS:-

The company failed to turn this initial success of Ind Suzuki into sustainable profits due to the high import content of the vehicle and it posted losses up to 1986. The merger with Sundaram Claytons moped division provided temporary respite to the company. In 1987, the company launched TVS- Champ the moped for the urban segment. TVS-Suzukis products lagged behind in performance and fuel efficiency. TVS Suzuki posted losses consecutively for three years 1989-1991. In 1990-91, due to labour problems, the company had to declare a lock out for 3 months. The company could not meet the new emission norms.

REASONS FOR DECLINE OF TVS SUZUKI

Outdated Two stroke engine technology. High capital cost as compared to Hero Honda and Bajaj Kawasaki. Lower market penetration and poor distribution and marketing efforts in North India. High level of market competition from technologically superior products like four stroke engine bikes of Bajaj and Hero Honda. Poor fuel efficiency product Lower market penetration and poor distribution and marketing efforts in North India.

CONFLICTS:
Suzukis efforts were not successful as Venu Srinivasan refused to agree to any change in the equity holding pattern. Differences took a serious dimension when the TVS group CMD Mr Venu Srinivasan approached the Prime Ministers Office (PMO) to stall Suzukis efforts to gain control of the venture. Letter to the PMO, claimed that Suzukis demands were motivated by a desperate desire to seize control of the company. The government of India decided not to interfere in the matter. Suzuki not only refused to provide funds and technology for the new models, but also created road blocks to the management instead of helping them. Instead of getting new technology from Suzuki, TVS Suzuki had to reengineer the basic Suzuki models, which led to the launch of the Samurai and the Shogun.

INTERIM RESOLUTION ( TVS & SUZUKI ) Both partners decided to resolve the matter. Suzuki sales in Japan and Europe was on decline and India appeared to be a emerging market. TVS needed Suzuki brand name to strengthen its holding in Indian motorcycle market. Further, it needed the Suzuki brand name to strengthen its hold in the Indian motorcycle market.

THE BREAK - UP
On September 2001, Sundaram Clayton and Japanese automobile major Suzuki Motor Corporation (SMC), partners in the joint venture TVS Suzuki (TVS Suzuki), announced their decision to break-up. TVS bought the 25.97% stake of Suzuki for Rs. 90 million, increasing its stake to 58.43%. Suzuki signed an agreement with TVS, according to which the existing licensing arrangement was to continue for 30 months. TVS agreed to pay royalty to Suzuki for this period. Suzuki realized that it would not be able to get a majority holding in TVS Suzuki and that it had only two options- either remain in the joint venture as a passive partner or move out to explore other. Suzuki had invested only around Rs. 60 million, whereas it had received around Rs. 900 million in royalties and dividends over the years. So, the stake sell off was not a bad move .

AFTER EFFECTS !

In the segment, TVS was now on its own to compete with the technical and financial might of other Indo - Japanese joint ventures. TVSs over- dependence on two-stroke technology was a definite handicap as the market had almost completely switched over to four-stroke engines. It was estimated that TVS would have to spend around Rs. 2 billion to convert to four-stroke technology. When consumers could choose from vehicles developed and produced by Japanese companies which had superior brand image, TVS was seen as a company all set to fight a losing battle.

TURNING IT AROUND

TVS Suzuki decided to become product led company with strong focus on R&D and product engineering. In 1991-92, a turnaround strategy was formulated for execution. Embarked on an exercise of cost cutting, slashed manpower and controlled inventory. Total number of employees reduced from 1855 in 1992-93 to 1272 in 19941995. Efforts paid off as the company launched five new products in 1992-93. The company paid special attention to the skill development of managers, sales officers and service engineers. TVS Suzuki interacted closely with the dealers to keep their motivation levels high and also conducted customer- retention program. TVS-Suzuki decided to become a product-led company with strong focus on R&D and production engineering. Besides building TVS as a brand, TVS Motor Company decided to reduce the product development time from 24 months to 12 months and to improve the sales and service programs at the dealers end. The fact that the companys market capitalization had more than trebled to Rs 57.52 billion in January 2002 from Rs 18.44 billion three months earlier seemed to indicate that the markets were ready to accept the company without Suzuki.

LAUNCHES THAT MADE THE STRATEGIES A SUCCESS:

Launched Indias first fully indigenously designed and manufactured motorcycle (2001). Launched the revolutionary VT-I engine for the best in class mileage in TVS Centra (2004). Launched TVS Apache - first bike to win 6 awards in a row (2006). Apache RTR - first two wheeler in India to have racing inspired engine and feature (2007) TVS Flame, TVS Scooty Electric Vehicle and Three Wheeler TVS King launched (2008) TVS Apache RTR 180 and TVS Streak launched (2009)

RESULTS:

Plant capacity enhancement resulted in greater profitability and profit share. R&D ensured leadership role. Energy management led to savings of Rs. 1-3 Crs. Per year. Reduction of excess man power resulted in increased profitability. Inventory management led to lower costs and provided an impetus to beating the competition in securing the large market share. Product diversification ensured that market requirements were met in all categories of two wheelers. R&D ensured more models and product diversification was achieved at minimal costs apart from ensuring leadership in the two wheeler segment. Aggressive marketing coupled with exploring of export markets expanded the market penetration of TVS products.

CONCLUSION:

TVS motors has come a long way across the tough terrain of business and is still going strong in the market. Core principles of quality, reliability, sense of ethics and service have served as the organization backbone, helping it stand strong in difficult situations. An inspirational turnaround story of winning a losing battle with optimistic attitudes striking down all odds. It is an exemplary example of survival in competition in driven market. The case also highlights the plight of a joint venture going the wrong way due to self centered interest on a partnering firm. Even though losing on the 4-stroke market the firm has manage to surge to again become the third largest two-wheeler manufacturer in India and is among the world's top ten.