The Automobile industry

The Indian automobile industry is the fourth largest in the world with an annual turnover of
$100 billion and employs 32 million people. The two-wheeler industry in India is the largest
in the world. India is also the largest tractor manufacturer and the eight largest commercial
vehicles manufacturer in the world.

Maruti Suzuki introduction

Maruti Suzuki India Limited, formerly known as Maruti Udyog Limited, is an automobile
manufacturer in India. It is a 56.21% owned subsidiary of the Japanese car and motorcycle
manufacturer Suzuki Motor Corporation. As of July 2018, it had a market share of 53% of
the Indian passenger car market

Pestle analysis
Political Factors:
The political factors in the Maruti Suzuki PESTLE Analysis can be explained as
follows:
Political factors that affect the sale and revenue of automobile companies like
Maruti Suzuki are rules and regulations formed by the government. The policies
which are laid by the government for the automobile sector need to be followed by
Maruti Suzuki. Taxation and labor laws, affect the overall revenue of the company if
the taxes increase then the company has to increase its product price, and there is
also an increase in labor laws by the government. High skilled labor finds it easy to
get a job in the automobile sector due to these labor laws. According to the target
market, the company manufactures small cars so that it can target economically
low-income consumers. The company needs to abide by the rules and regulations
while exporting or importing its counterparts from the international market.
Image: Wikimedia

Economic Factors:
Below are the economic factors in the PESTLE Analysis of Maruti Suzuki:
The economy of a country affects the sales and revenue of an automobile company
like Maruti Suzuki. As the economy of India currently, is facing a downfall so the
automobile sector is facing an economic crisis. Maruti Suzuki is the leading
automobile company in India but due to the economic downfall, its sales decreased
by 32.7 percent in August 2019. An increase in interest and inflation rate will result in
a negative impact on the growth if the company. The oil price is a major factor in
determining the sale of the company, as the oil prices are rising people are not
willing to buy the cars and thus the sale decreases. The manufacturing sector has
grown by around 10 percent per annum in the last few years. But due to the
economic slowdown this year, the company has curtailed its manufacturing.

Social Factors:
Following are the social factors impacting Maruti Suzuki PESTLE Analysis:
Socially Maruti Suzuki has done a lot for the people, Maruti Suzuki believes in serving
enhanced customer requirements, and perceived social value. Maruti has set up
many welfare camps, took initiative for the education of the underprivileged, has
adopted energy-saving technologies, reduced water wastage, taken care of road
safety, etc. Maruti Suzuki has set up its driving schools to assure every person learns
the right approach and to minimize the risk of accidents. Maruti has always fulfilled
and delivered the needs of common people. Due to the cricket world cup, IPL, etc, the
country attracts tourism so there is a great opportunity for a company like Maruti to
increases its marketing and business. As Maruti has a strong brand value it attracts
people easily. To cater to the needs of the youth, Maruti has also launched Maruti
Genuine Accessories which extends stereo systems, carpets, body covers, and many
other car care products for its huge customer base.

Technological Factors:
The technological factors in the PESTLE Analysis of Maruti Suzuki are mentioned
below:
The automobile sector always needs to be updated in technologies to consider
driving safety needs and innovations in the model. The company invests a lot in
research and development to improve engine features. Maruti Suzuki is involved in
the manufacturing of fuel-efficient and small car engines. For its highest selling car
Alto it launched a CNG kit. The company applies next-generation KB series engine in
its new hatchback car A-star. The company developed the LPG/CNG/Hybrid system
for the MPI engine to use as the alternate fuel technology. The company has
included a virtual design review to its Research and development department to
assure the virtual validation to reduce the cycle time and development cost of
manufacturing.

Legal Factors:
Following are the legal factors in the Maruti Suzuki PESTLE Analysis:
Maruti Suzuki has to follow the highest standards of corporate governance. All the
legal laws need to be followed by the company to take care of the safety of the
consumers. The company has evolved a legal compliance scheduling and
management software by which specific tasks are given to every individual. The
customers can contact any time for their queries to the secretarial and legal
department. Maruti Suzuki is involved in international trade, so it has to follow the
trade laws of every country involved. Increased level of regulations and privatization
of the automobile sector also affects the sale of Maruti Suzuki.

Environmental Factors:
In the Maruti Suzuki PESTLE Analysis, the environmental elements affecting its
business are as below:
The automobile industry follows international standards of emission and safety.
There is a growing concern about the pollution caused by automobiles. Maruti
Suzuki enables a continuous process of promoting recyclable and reusable car
parts. Maruti is also practicing the 3 R model - Reuse, Reduce, Recycle for a long
time. Cars which are economical and eco-friendly are introduced by the company like
hybrid cars. In August 2010, the company took an initiative to introduce
environmentally friendly cars which are fitted with CNG option across the vehicle
segment which included Eco, Alto, Estilo, Wagon R, and SX4. Thus Maruti became
the first-ever automobile company to introduce and manufacture CNG fitted models
of car.
To conclude, the above Maruti Suzuki PESTLE Analysis highlights the various
elements which impact its business performance. This understanding helps to
evaluate the criticality of external business factors for any brand.

SWOT ANALYSIS
 Strength- 1. Maruti Suzuki is the largest passenger car company in India,
accounting for around 45% market share
2. Over 12,000 people are employed with Maruti
3. Good advertising, product portfolio, self-competing brands
4. Largest distribution network of dealers and after sales service centres
5. Strong brand value and strong presence in the second hand car market
6. Having different revenue streams like Maruti finance, Maruti Insurance and Maruti
driving schools
7. Over 700,000 units sold in India annually including 50,000 exports
8. Maruti Suzuki launched NEXA showrooms to cater to its premium cars market
9. The company has been recognized by several awards in the automobile segment
in India

Weakness- 1. Inability to penetrate into the international market

2. Employee management, strikes, worker wage problems have affected Maruti's
brand image in the past

Opportunities- 1. Developing hybrid cars and fuel efficient cars for the future
can be an opportunity for Maruti Suzuki
2. Maruti can target tapping emerging markets across the world and building a
global brand
3. Fast growing automobile market and increased purchasing power

Threat- 1. Government policies for the automobile sector across the world
2. Ever increasing fuel prices
3. Intense competition from global automobile brands and cheaper brands can
hurt Maruti Suzuki's business
4. Substitute modes of public transport like buses, metro trains etc

Maruti Suzuki Porters Five Forces Analysis 2017-2018

4.1 Power of buyers
In the last 15-20 years, Maruti Suzuki managed to dominate the Indian automotive
market based on a value for money foundation of producing cheap fuel efficient cars
backed by good after sales with little regard given to style or features. In the past, this
served the market well due to the economic realities of weak purchasing power,
barriers such as regulatory protection and information asymmetry. But as incomes
rise, and technology fuels disruptive technology, while knowledge becomes a
commodity, power has shifted somewhat to buyers. Sources of competitive advantage
are beginning to move beyond price to include differentiation, hence why Hyundai is
gaining (Rao 2014). Nevertheless, because Indians rank car resale value very highly,
it makes switching brands very hard so they get locked in to certain brands limiting
buyer power of Indian car buyers hence the continued dominance of Maruti (Mehra
2017; Senguptal 2016).
4.2 Power of suppliers
Due to the sheer number of car manufacturers and brands setting up shop in India, it
has also spawned an influx of component manufacturers who supply the auto
industry. This gives them power over some brands that are not OEM manufacturers
such as Tata Motors or Mahindra.
4.3 Rivalry within existing firms
India’s automotive industry currently resembles a duopoly with the top two car
manufacturers commanding more than 65% of the entire passenger vehicle market
consisting of 18 car and SUV manufacturers ((Annual Report 2017; Mukherjee 2017;
Mundy 2017). This is a legacy of many factors including early mover advantage of the
Maruti Suzuki joint venture since 1982 while Hyundai started manufacturing
operations in 1992, the first foreign car brand to do so (Rao 2014). Government
subsidy arising from the government’s shareholding in the Maruti Suzuki joint
venture was an added perk for Maruti at least until 2007 when the government sold
its shareholding. These factors have helped Maruti and Hyundai build unmatched
distribution, sales and service outlets, helping them establish brand loyalty and
reputation that will take time for rivals to overcome (Rao 2014).
4.4 Threat of substitutes
Another unique feature of India’s automotive industry is the massive presence of two
wheelers, whose unit volume sales reached 18million (or 81% market share of the
automobile market) compared to passenger vehicle unit sales of 3.4million--13%
market share (Statista 2017). This means car purchases in India have a far bigger
threat from two wheeler substitutes compared to other modes of transportation in
other countries. Together with the rail, they offer a more affordable way of travelling
within the country for the poor as almost half of two-wheelers sales comes from rural
markets. Car rentals and cab aggregating platforms are another substitute whose
continued growth is driven primarily by millenials but whose threat isn’t substantial
due to fragmentation with demand mostly for short duration trips or weddings (Euro
Monitor 2017; Mukherjee 2016).
4.5 Threat of entry/Barriers to entry
As the incumbent leader with the dominant market share in India’s automobile
industry, Maruti Suzuki is all too aware of the threat new entrants pose to both its
dominance of market share as well as profitability in different car segments as well as
the automobile entire market. The threat of entry in an industry is usually
determined by the barriers to entry that existing players set up to try and barricade
themselves from competition.  In India’s automobile industry, Maruti is facing
increased competition from domestic rivals such as Hyundai Motors India that
has been eroding Maruti Suzuki dominance since 2012.
But rather than start a price war with new entrants vying for some of the attractive
and lucrative car segments it dominates, Maruti Suzuki has instead embarked on a
strategy of raising entry barriers in an effort to fortify itself against increased
competition. In business strategy, one of the most effective offensive strategies
incumbent market leaders use when facing market share erosion across key
segments is to raise entry barriers through tactical maneuvers such as capital
expenditure on new products, increased differentiation aimed at reinforcing
consumer loyalty, or an outright price war against an encroaching competitor to
deter them (Grant 2010; Johnson 2008).
A price war or increased capital expenditure on new car models isn’t the most
favored option by carmakers because it’s risky yet very expensive. Maruti Suzuki has
instead managed to gain and sustain its current competitive advantage through a
four thronged counter-offensive strategy that has focused on raising entry barriers
and fortifying its dominant position through 1) incremental product intervention, 2)
distribution network expansion, 3) improved service offering and 4) digitization as
detailed below (Annual Report 2017; Bhargava 2017; Murkherjee 2017).
4.5.1 Incremental product interventions
When Maruti Suzuki realized at some point in the last few years that it was losing
appeal among growing millennials and the more affluent segments of the population;
it quickly launched new products and services to counter this. For long seen as the
“not-so-premium” brand for price-conscious consumers, Maruti Suzuki wanted to
shed the dull image and move beyond its traditional value-seeking customer base
(Rao 2014; Bhargava 2017). It has done this by slowly introducing cars with more
stylish designs and sophisticated features to appeal to the young and more affluent.
It has redesigned many of cars, including the Baleno RS as well as its bestselling car,
the Alto which is currently more aerodynamic and stylish compared to past models.
For young millennials, it has introduced a brand new compact hatchback, the Ignis,
and the premium Ciaz hybrid for environmentally conscious elites (Mukherjee 2017;
Annual Report 2017).
4.5.2 Accelerated distribution network-expansion programmes

 Maruti also embarked on an accelerated network expansion programme

adding new distribution, service and sales outlets, expanding a network
 infrastructure that was already substantially bigger than rivals’. Now it boasts
a nationwide service network spanning over 1500 cities and towns and a sales
network that spreads across 1471 cities, backed by 2 state-of-art factories
(Marutisuzuki.com 2017).

4.5.3 New and Improved services

 It also launched new services in an effort to shed its staid image including the
launch of the Nexa chain of premium retail outlets in 2015 to serve higher end
consumers (Bhargava 2017). This was followed by a plan for a nationwide
complete revamp all True Value outlets, the independent sales and service
network offering buyers of pre-owned Maruti Suzuki cars a safe, reliable and
hassle free purchase experience as buyers of new cars (Annual Report 2017).

4.5.4 Digitization

 Maruti Suzuki has started leveraging digital integration to differentiate itself

from competitors through innovations such as digitally enhanced showrooms
enhanced like Nexa premium stores and Arena, which use digital technology
to provide more information, customised buying experience and convenience
to Indian car shoppers (Business Standard 2017).

All these operations have been part of an offensive strategy aimed at transforming a
staid market leader coping with anxieties in the last 4-5 years about staying relevant
in an India whose demographic landscape is shifting rapidly. Fortunately for Maruti
Suzuki, the result of the strategic transformation is a now formidable infrastructure
of resources and capabilities that are creating mobility barriers for rivals seeking to
challenge it across the many market segments in the Indian automobile industry.

BCG MATRIX