KEY STRATEGIC INITIATIVES BY MARUTI SUZUKI INDIA LIMITED

Maruti Suzuki India Limited was the undisputed leader in the automobile utilitycar segment sector, controlling about 84% of the market till 1998. With increasing competition from local players like Hindustan Motors, Mahindra & Mahindra and foreign players like Toyota, Ford, Mitsubishi, GM, the whole auto industry structure in India has changed in the last few years and resulted in the declining market share for Martin Suzuki India limited. At the same time the Indian government permitted foreign car producers to invest in the automobile sector and hold majority stakes. In the wake of its diminishing profits and loss of market share, Maruti Suzuki India Limited initiated strategic responses to cope with India's liberalization process and began to redesign itself to face competition in the Indian market. Consultancy firms such as AT Kearney & McKinsey, together with an internationally reputed OD consultant, Dr. Athreya, have been consulted on modes of strategy and organization development during the redesign process. The redesign process saw Maruti Suzuki india limited complete a Rs. 4000 mn expansion project which increased the total production capacity to over 3,70,000 vehicles per annum. Maruti Suzuki india limited executed a plan to launch new models for different segments of the market. In its redesign plan, Maruti Suzuki india limited launches a new model every year, reduce production costs by achieving 85-90% indigenization for new models, revamp marketing by increasing the dealer network from 150 to 300 and focus on bulk institutional sales, bring down number of vendors and introduce competitive bidding. Together with the redesign plan, there has been a shift in business focus of Maruti Suzuki india limited When Maruti

Suzuki india limited commanded the largest market share, business focus was to 'sell what we produce'. The earlier focus of the whole organization was "production, production and production" but now the focus has shifted to "marketing and customer focus". This can be observed from the changes in mission statement of the organization: 1984: "Fuel efficient vehicle with latest technology". 1987: "Leader in domestic market and be among global players in the overseas market". 1997: "Creating customer delight and shareholders wealth". Focus on customer care has become a key element for Maruti Suzuki india limited. Increasing Maruti Suzuki india limited service stations with the scope of one Maruti service station every 25 km on a highway. To increase its market share, Maruti Suzuki india limited launched new car models, concentrated on marketing and institutional sales. Institutional sales, which currently contributes to 7-8% of Maruti Suzuki india limited total sales. Cost reduction and increasing operating efficiency were another redesign variable. Cost reduction is being achieved by reaching an indigenization level of 85-90 percent for all the models. This would save foreign currency and also stabilize prices that fluctuate with exchange rates. However, change in the mindset was not as fast as required by the market. Maruti Suzuki india limited planned to reduce costs, increase productivity, quality and upgrade its technology (Euro I&II, MPFI). In addition, it followed a high volume production of about 400,000 vehicles / year, which entailed a smooth relationship between the workers and the managers. Post 1999, the market structure changed drastically. Just before this change, Maruti Suzuki india limited had wasted two crucial years (1996-1998) due to governmental interventions and negotiation with Suzuki of Japan about the breakup of the share holding pattern of the company. There was a change in leadership, Mr. Sato of Suzuki became the Chairman in June 1998, and the new Mr.J. Khatter was appointed as the new Joint MD. Khatter was a believer in consensus decision making and participative style of management.As a result of the internal turmoil and the changes in the external environment, Maruti Suzuki india limited faced a depleting market share, reducing profits, and increase in inventory levels, which it had not faced in the last 18 years.

After their fall in market share they redesigned their strategies and through their parent company Suzuki they learned a lot.The organizational learning of Maruti Suzuki india limited was moderately successful, the cost was relatively inexpensive as Maruti Suzuki india limited had its strong Japanese practices to fall back upon. With the program of organizational redesign, rationalization of cost and enhanced productivity, Maruti Suzuki india limited bounced back to competition with 50.8% market share and 40% rise in profit for the FY2002-2003. CURRENT STRATEGIES FOLLOWED BY MUL PRICING STRATEGY - CATERING TO ALL SEGMENTS Maruti Suzuki india limited caters to all segment and has a product offering at all price points. It has a car priced at Rs.1,87,000.00 which is the lowest offer on road. Martin Suzuki india limited gets 70% business from repeat buyers who earlier had owned a Maruti car. Their pricing strategy is to provide an option to every customer looking for up gradation in his car. Their sole motive of having so many product offering is to be in the consideration set of every passenger car customer in India. Here is how every price point is covered. OFFERING ONE STOP SHOP TO CUSTOMERS OR CREATING DIFFERENT REVENUE STREAMS Maruti Suzuki india limited has successfully developed different revenue streams without making huge investments in the form of, Maruti Insurance and Maruti Finance. These help them in making the customer experience hassle free and helps building customer satisfaction. Maruti Finance: In a market where more than 80% of cars are financed, Maruti has strategically entered into this and has successfully created a revenue stream for Maruti. This has been found to be a major driver in converting a Maruti Suzuki india limited car sale in certain cases. Finance is one of the major decision drivers in car purchase. Maruti Suzuki india limited has tied up with 8 finance companies to form a consortium. This consortium comprises Citicorp Maruti, Maruti Countrywide, ICICI Bank, HDFC Bank, Kotak Mahindra, Sundaram Finance, Bank of Punjab and IndusInd Bank Ltd.( erstwhile-Ashok Leyland Finance). Maruti Insurance : Insurance being a major concern of car owners. Martin Suzuki india limited has brought all car insurance needs under one roof. Martin Suzuki india limited has tied up with National Insurance Company, Bajaj Allianz, New India Assurance and Royal Sundaram to bring this service for its customers. From

identifying the most suitable car coverage to virtually hassle-free claim assistance it's your dealer who takes care of everything. Maruti Insurance is a hassle-free way for customers to have their cars repaired and claims processed at any Maruti dealer workshop in India. The launch of Swift and phasing out Zen is a strategic move. Alto was launched keeping in mind that it will take over Maruti 800 market in future. Perhaps being the flagship product phasing out of Maruti 800 faced lots of resistance from dealers all over. Another reason behind not phasing out Maruti 800 was the fear of brand shift of customers to other competitor's product. Swift was launched in May, 2005 in the price band starting from 4 lacs. Before launch of Swift, Maruti Suzuki india limited management had decided that they will phase out Zen since it had already came up with two modifications. The major reason behind this decision was cannibalization of Wagon R and Swift due to overlapping of price band. It is a rational decision to kill a product before it starts facing the decline stage in product cycle. Martin Suzuki india limited is offering Rs. 3000.00 more margins to dealer on the sale of Wagon-R as compared to Zen. This is to let dealer push Wagon R instead of Zen. MARUTI PLANS FOR A BIG DIESEL FORAY The new car manufacturing company, called Maruti Suzuki India Limited, will be a joint venture between Maruti Udyog and Suzuki Motor Corporation holding a 70 per cent and 30 per cent stake respectively. The Rs1,524.2 crore plant will have a capacity to roll out 1 lakh cars per year with a capacity to scale up to 2.5 lakh units per annum. The new car manufacturing plant will begin commercial production by the end of 2006. Maruti Suzuki India limited would set up a diesel engine plant at Gurgaon in line with its plan to become a major player in diesel vehicles in a couple of years. This has been done in the wake of major competition from Tata Indica and meets the growing demand of diesel cars in India. While the annual growth in the diesel segment was 13 per cent in the last three years, it was 19-20 per cent in the first quarter (April-June) of the current fiscal. Martin Suzuki India limited has currently an insignificant presence in diesel vehicle. It will manufacture new generation CRDI (common rail direct injection) engines in collaboration with Fiat-GM Opel and engines will be of 1200 cc. The plant with a capacity to produce one lakh diesel engines would be operational in 2006. At present, Peugeot of France, supplies diesel engines for Maruti's Zen and mid-sized Esteem models. This will

further reduce the imported component in Maruti vehicles, making them more competitive in the Indian market.

MARUTI SUZUKI INDIA LIMITED PLANS FOR A NEW ENGINE AND TRANSMISSION PLANT The engine and the transmission plant will be owned by Suzuki Powertrain India Limited in which Suzuki Motor Corporation would hold 51 per cent stake and Maruti Udyog holding the balance. The ultimate total plant capacity would be three lakh diesel engines. However, the initial production would be 1 lakh diesel engines, 20,000 petrol engines and 1.4 lakh transmission assemblies. Investment in this facility will be Rs.1,747.7 crore. The commercial production will start by the end of 2006. INDIA AS EXPORT HUB FOR MARUTI Three years back as an experiment, based on the increasing design capabilities of suppliers in countries like India, McKinsey did an exercise to figure out just how much money could be saved if automobiles were to be made in overseas locations like India, Mexico and South Africa -- an automobile BPO, so to speak. The result was staggering: the industry stands to gain $ 150 billion annually in cost savings, and an additional $ 170 billion annually in new revenues once demand shoots up following the drop in prices, and the combination of which means a 25 per cent increase in existing revenue levels. According to the study, over 90 per cent of automobiles today are sold in the countries they are made in, so there's a lot of money to be made by shifting the production overseas. Till recently, just 100,000 cars produced in low-cost countries were exported to high-cost ones -- presumably this figure is going up now that Altos from Martin Suzuki india limited, Santros from Hyundai, Indicas from Tata Motors, and Ikons from Ford, among others, are being regularly exported out of India. Yet, as McKinsey points out, since it just costs $ 500 and just three weeks (and both figures are falling) to ship out a car to anywhere in the world, why produce cars in high-wage islands? If a car was produced in India instead of in Japan, the study says, it will cost 22-23 per cent less, after factoring in higher import duties for components/steel, lower levels of automation, and transport costs.

In August, 2003 Martin Suzuki India limited crossed a milestone of exporting 300,000 vehicles since its first export in 1986. Europe is the largest destination of Maruti's exports and coincidentally after the first commercial shipment of 480 units to Hungary in 1987, the 300,00 mark was crossed by the shipment of 571 units to the same country. The top ten destination of the cumulative exports have been Netherlands, Italy, Germany, Chile, U.K., Hungary, Nepal, Greece, France and Poland in that order. The Alto, which meets the Euro-3 norms, has been very popular in Europe where a landmark 200,000 vehicle were exported till March 2003. Even in the highly developed and competitive markets of Netherlands, UK, Germany, France and Italy Maruti Suzuki india limited vehicles have made a mark. Though the main market for the Maruti vehicles is Europe, where it is selling over 70% of its exported quantity, it is exporting in over 70 countries. Maruti Suzuki India limited has entered some unconventional markets like Angola, Benin, Djibouti, Ethiopia, Morocco, Uganda, Chile, Costa Rica and El Salvador. The Middle-East region has also opened up and is showing good potential for growth. Some markets in this region Saudi Arabia, Kuwait, Bahrain, Qatar and UAE. The markets outside of Europe that have large quantities, in the current year, are Algeria, Saudi Arabia, Srilanka and Bangladesh. Maruti exported more than 51,000 vehicles in 2003-04 which was 59% higher than last year. In the financial year 2003-04 Martin Suzuki india limited exports contributed to more than 10% of total Maruti Suzuki India Limited sales.

KEY SUCCESS FACTORS (1)The Quality Advantage Martin Suzuki India Limited owners experience fewer problems with their vehicles than any other car manufacturer in India (J.D. Power IQS Study 2004). The Alto was chosen No.1 in the premium compact car segment and the Esteem in the entry level mid - size car segment across 9 parameters. (2)A Buying Experience Like No Other

Maruti Suzuki India Limited has a sales network of 307 state-of -the-art showrooms across 189 cities, with a workforce of over 6000 trained sales personnel to guide MUL customers in finding the right car. (3)Quality Service Across 1036 Cities In the J.D. Power CSI Study 2004, Maruti Suzuki India Limited scored the highest across all 7 parameters: least problems experienced with vehicle serviced, highest service quality, best in-service experience, best service delivery, best service advisor experience, most user-friendly service and best service initiation experience. 92% of Maruti Suzuki india limited owners feel that work gets done right the first time during service. The J.D. Power CSI study 2004 also reveals that 97% of Maruti Suzuki owners would probably recommend the same make of vehicle, while 90% owners would probably repurchase the same make of vehicle. (4)One Stop Shop At Maruti Suzuki india limited customers will find all car related needs met under one roof. Whether it is easy finance, insurance, fleet management services, exchange- Maruti Suzuki is set to provide a single-window solution for all car related needs. (5) The Low Cost Maintenance Advantage The acquisition cost is unfortunately not the only cost customers face when buying a car. Although a car may be affordable to buy, it may not necessarily be affordable to maintain, as some of its regularly used spare parts may be priced quite steeply. Not so in the case of a Maruti Suzuki India limited It is in the economy segment that the affordability of spares is most competitive, and it is here where Maruti Suzuki shines. (6)Lowest Cost of Ownership The highest satisfaction ratings with regard to cost of ownership among all models are all Maruti Suzuki vehicles: Zen, Wagon R, Esteem, Maruti 800, Alto and Omni. (7) Technological Advantage

It has introduced the superior 16 * 4 Hypertech engines across the entire Maruti Suzuki range. This new technology harnesses the power of a brainy 16-bit computer to a fuel-efficient 4-valve engine to create optimum engine delivery. This means every Maruti Suzuki owner gets the ideal combination of power and performance from his car. FUTURE CHALLENGES Maruti has always been identified as a traditional carmaker producing value-formoney cars and right now the biggest hurdle Maruti is facing is to shed this image. Maruti wants to change it for a more aggressive image. Maruti Baleno has failed due to one of the major reasons being that customers could not identify Maruti with a car as sophisticated as Maruti Baleno. Maruti is looking forward to bring about a perception change about the company and its cars. Maruti started the exercise with the new-look Zen, and Suzuki's decision to pick India as one of the first markets for this radically different-looking car gave this endeavor a new thrust. Maruti has also changed its logo at the front grill. It has replaced the traditional Maruti logo on grill 'stylish 'M' with S'. The major thrust in the facelift endeavour is with the launch of 1.3 litre Swift. It's a style statement from Maruti to Indian market. The next threat Maruti faces is the growing competition in compact cars. Companies like Toyota, Ford, Honda and Fiat are planning to come out with small segment cars in near future.Ford is launching Focus and Fiesta, GM is launching Aveo in 2006, Chevrolet is launching Spark in 2006, Hyundai is launching its new compact car in 2006, Honda is launching Jazz in 2006, GM is has reduced prices of its Corsa, Fiat is coming up with Panda and new Fiat Palio, Skoda is launching Fabia. All this will pose a major threat to Maruti leadership in compact cars. New emission norms like Bharat Stage 3 which has come into effect from April 2005 has increased car prices by Rs.20000 and Bharat Stage 4 which is coming into force in 2007 will contribute in increasing car prices further. This could be of concern to Maruti which is low cost provider of passenger cars. Rise in petrol prices and growing popularity of other substitute fuels like CNG will be another threat to Maruti. There is also a threat to Suzuki from R&D investment by Toyota and Honda in Hybrid cars. Hybrid cars could run on both petrol and gaseous fuels. There is a threat to Maruti models ageing. Maruti models like Maruti 800 which is in market for the last twenty years and others like Zen and Esteem which have also

entered the decline phase are the other threats. Maruti is planning phasing out Zen in 2007 and there were rumors of phasing out Maruti 800 also. This all makes Suzuki to replace these brands with new launches . As Swift and Wagon R are replacing the Zen market. Maruti will have to keep on making modifications in its present models or its models will face extinction.

Market segmentation policy was adopted that targeted different type of consumers with different type of models. Maruti800 targeted medium income group, while the deluxe model targeted rich income group. Maruti van targeted businessmen and doctors(ambulance) The Gypsy targeted the paramilitary forces and the police. This resulted in complete control of maruti over the market. The company advertised its different products according to costumers e.g. maruti van was rechristened as Omni. A special cell was made to make direct dealing of Gypsy with the government & the army.

COMPETITIVE ADVANTAGE OF MARUTI SUZUKI Dealer network across the country: A wide dealership network allows the company to service customers over a wider geographical area than competitors. Currently, MUL has 500 sales outlets that cover 312 cities, as compared to 162 outlets of Hyundai Motors and 140 outlets of Tata Motors. True Value Operations: MUL providing its customers an opportunity to resale their car to MUL or exchange with a new Maruti car under its True Value network has proven really beneficial. PROMOTION OF MARUTI SUZUKI Advertisements targeting different segments promotional offers throughout the years Psychographics is used : Wagon-R: Smarter people (executives) Omni: People who need to transport goods Alto: Small car: small family Zen Estillo: Young trendy people

THE LUXURY MODELS OF MARUTI SUZUKI INDIA LIIMTED : Maruti Suzuki India Limited has launched two luxury models SX4 in 2006 and A STAR in Nov2008; these two models are facing intense competition from already

established companies. Maruti Suzuki India Limited has launched one another luxury model KIZASHI in 2011.

SWOT ANALYSIS OF MARUTI SUZUKI

Strengths : Brand Image Reliable and cheap Established brand in Indian market Experience in Indian market Very old player in Indian market and First major player Established distribution & after sales network Product for many segment of market

Weaknesses : Diseconomies to scale No online presence Not diversified

Opportunities Threats Competition : Acquisitions Cheaper technology Innovation External changes (government, politics, Online taxes, etc.) Product and services expansion Lower cost competitors or imports Takeovers Targeting Higher Middle Class Price wars Product substitution requirements.

MARUTIS CURRENT PROBLEMS

Maruti Suzuki India Limited is far behind in luxury and SUV car, the other player like GM, TATA, Mahindra, Mitsubishi and Toyota are already established in the market, so replacing them would not be easy. Maruti Suzuki India Limited has been now emphasizing consistently on its ,Best customer satisfaction car to keep a psychological impact on costumers.