TABLE OF CONTENTS

1. Introduction ............................... ................................................... ................................................... ................... 3 2. Industry Overview and Structure ................................... ................................................... .................................. 3 3. Company Overview ................................... ................................................... ................................................... .... 4 4. Company Strategy ..................................... ................................................... ................................................... ... 5 4.1. Generic Strategy ..................................... ................................................... .................................................. 5 4.2. Strategic Initiatives ................................... ................................................... ................................................ 5 4.3. Competitor Strategy ..................................... ................................................... ............................................ 6 5. Brand Positioning ................................. ................................................... ................................................... ......... 6 6. Resource-based View of Maruti Suzuki ........................................ ................................................... ................... 7 6.1. VRIN Framework ................................ ................................................... ................................................... .... 7 6.2. Tetra-Threat Framework ................................ ................................................... .......................................... 8 7. Future Scope and Recommendations ..................... ................................................... ....................................... 10

1. INTRODUCTION
The Indian Automotive Industry comprises of the automobile and the auto component sectors and includes passenger cars; light, medium and heavy commercial vehicles; multiutility vehicles such as jeeps, scooters, motor-cycles, three wheelers and tractors; and auto components like engine parts, drive and transmission parts, suspension and braking parts, electricals, body and chassis parts, etc.1 The Automobile segment manufactures over 11 million vehicles and exports around 1.5 million vehicles each year. The dominant products of the industry are two wheelers (approx. 75% market share) and passenger vehicles. About 91% of the vehicles sold are used by households and only about 9% for commercial purposes. The industry has attained a turnover of more than USD 35 billion and provides direct and indirect employment to over 13 million people.2 On 31-Mar-2010, passenger vehicles contributed to 15.34% of the automobiles in the country.3 The industry under study is the passenger car segment of the automobile industry.
1 http://business.gov.in/Industry_services/automobil e_industry.php 2 http://www.imaginmor.com/automobileindustryin dia.html 3 http://acmainfo.com/docmgr/Press_Releases/ACM A_ppt_Feb_8_ver_4_0_Edit.pdf 4 http://business.mapsofindia.com/automobile/ 5 http://dhi.nic.in/annrep_eng_1011.htm 6 http://www.automobileindustryindia.com/resource s/overview-of-indian-automobile-industry.html

Porter, Michael E. (1980) Competitive Strategy, New York: The Free Press. Maruti Suzuki India Limited ("Maruti"), the incumbent under consideration was established in 1981 and is the country's largest passenger car manufacturing company with a market share of 46%.2 It reported consolidated revenues of $4.8 billion in 2010 and manufactures cars in all
7

segments - passenger cars, SUVs and sedans.4

2. INDUSTRY OVERVIEW AND STRUCTURE

The automotive industry in India started with the establishment of Mahindra & Mahindra in the 1940s. However, the License Raj discouraged involvement of the private sector and the growth of the industry was slow during 1960s. During 1980-85 the sector experienced major growth opportunities with rising demand and the entry of leading Japanese car manufacturers via joint ventures. In 1991, with the liberalization of the Indian economy, the automobile sector was opened up and 100% FDI was allowed. This encouraged private investment and duty free technology transfer. Leading international car makers entered Indian market in 1995-2000. Since 2000, several trade and investment restrictions has been removed to speed up the process of liberalization of the sector. Firms have started investing heavily in R&D to sustain growing competition in the industry. Currently the Indian Auto Industry contributes nearly 5% to National GDP,5 is the world's second fastest growing auto market and is the sixth largest automobile industry after China, the US, Germany, Japan and Brazil.6 The automobile industry and specifically the passenger vehicle segment is structured such that the orders arise from the consumers while the products are channelled from the top of the supply chain. Automobile manufacturers source most of their raw materials and components and their main value add is the final assembly of the vehicles. Vehicles are sold to customers through dealerships of automobile manufacturers. The demand determinants for consumers, primarily India's

growing middle class, are affordability, product innovation, infrastructure and price of fuel. As per Porter's forces shaping the industry structure and competitiveness, the Indian automobile industry is ranked as moderately attractive (3.069/5.000).7 The factors that make the industry slightly unattractive are barriers to exit and the power of buyers. However, these are more than offset by the rest of the factors that favour the incumbent in the industry.

3. COMPANY OVERVIEW
Maruti Suzuki India Limited (originally established as Maruti Udyog Ltd.) is a subsidiary of Suzuki Motor Corporation. Suzuki Motor Corporation, headquartered in Japan, is a global manufacturer of motorcycles, automobiles, outboard motors and related products.8 ffd8ffe000104a4649460001020 100c800c80000ffe20c58494343 5f50524f46494c450001010000 0c484c696e6f021000006d6e74 725247422058595a2007ce000 2000900060031000061637370 4d53465400000000494543207 3524742000000000000000000 0000000000f6d6000100000000 d32d485020200000000000000 0000000000000000000000000 0000000000000000000000000 0000000000000000000000000 0000001163707274000001500 0000033646573630000018400 00006c77747074000001f00000 0014626b70740000020400000 0147258595a00000218000000 146758595a0000022c0000001 46258595a0000024000000014 646d6e6400000254000000706 46d6464000002c40000008876 7565640000034c00000086766 96577000003d4000000246c75 6d69000003f8000000146d6561 730000040c000000247465636 8000004300000000c72545243 0000043c0000080c6754524300 00043c0000080c625452430000 043c0000080c74657874000000 00436f70797269676874202863 292031393938204865776c657

4742d5061636b61726420436f6 d70616e790000646573630000 0000000000127352474220494 54336313936362d322e310000 0000000000000000001273524 7422049454336313936362d32 2e31000000000000000000000 0000000000000000000000000 00000000

ffd8ffe000104a464946000 1020100c800c80000ffe20 c584943435f50524f46494 c4500010100000c484c69 6e6f021000006d6e74725 247422058595a2007ce00 020009000600310000616 373704d53465400000000 494543207352474200000 000000000000000000000 00f6d6000100000000d32 d48502020000000000000 000000000000000000000 000000000000000000000 000000000000000000000 000000000000000000011 637072740000015000000 033646573630000018400 00006c77747074000001f0 00000014626b707400000 204000000147258595a00 000218000000146758595 a0000022c000000146258 595a00000240000000146 46d6e6400000254000000 70646d6464000002c4000 00088767565640000034c 000000867669657700000 3d4000000246c756d6900 0003f8000000146d65617 30000040c000000247465 6368000004300000000c7 25452430000043c000008 0c675452430000043c000 0080c625452430000043c 0000080c7465787400000 000436f70797269676874 202863292031393938204 865776c6574742d506163 6b61726420436f6d70616 e79000064657363000000 000000001273524742204

9454336313936362d322e 310000000000000000000 000127352474220494543 36313936362d322e31000 000000000000000000000 000000000000000000000 000000000

8 http://www.marutisuzuki.com/ 9 http://www.marutisuzuki.com/carsimages/image/pdf/AR-10-11.pdf 10 http://www.moneycontrol.com/competition/maruti suzukiindia/comparison/MS24#MS24

In India, Maruti Suzuki has been a market leader in the passenger car segment for the last two and a half decades and it currently enjoys a 46% market share.2 Maruti entered the sector in 1983 with Maruti 800, an entry level compact car designed to fill the need of price-sensitive Indian customers. The model was a huge success and the subsequent launch of Maruti Alto, India's most selling car, enabled Maruti to retain the leading position in the segment. In recent years, the company has faced increasing competition from new companies and foreign companies. It has however expanded its offering from A-1 to A-3 segments and has come up with new models to counter the competition. Currently, Maruti offers 15 brands and over 150 variants.9 Maruti's total sales have risen at a CAGR of 17.14% over the last five years and in February 2012, it became the first Indian company to cross the 10 million cumulative sales mark.9 The sales volume growth and the cost structure breakdown for Maruti Suzuki is as given below:

Figure 1: Sales Volume Growth10

Figure 2: Cost Structure9

In 2010-11, Maruti Suzuki reported revenues of Rs. 408.66 billion, EBITDA of Rs. 42.58 billion and net profit of Rs. 22.88 billion. At 5.6%, Maruti's net profit margin is greater than the industry average and the

low debt to equity ratio portray the strength of its balance sheet. Exports have grown at a steady rate and account for over 15% of total sales. Also, compared to an industry average of 13%, the ROCE was 21.69 % for Maruti. Key financial ratios for Maruti are shown in the table below: Table 1: Maruti's Key Financial Ratios10 Mar'11 Operati ng Profit Margin (%) Net ProfitMa rgin (%) ROCE (%) Debt to Equity Ratio Current Ratio Inventor y Turnove r Ratio Asset Turnove r Ratio 9.14 Mar'10 12.74 Mar'09 9.18 Mar'08 14.12 Mar'07 14.88

6.13

8.34

5.72

9.34

10.29

21.69 0.02

27.89 0.07

17.37 0.07

26.18 0.11

30.65 0.09

1.47 33.33

0.91 30.47

1.51 30.46

0.91 22.93

1.40 21.27

3.13

2.82

2.38

2.48

2.41

Maruti Suzuki also offers many allied services like Maruti Insurance to provide vehicle insurance to its customers, Maruti Finance to assist customer financing and Maruti TrueValue to provide a platform for selling and buying used cars. Maruti Suzuki's overall financial performance is above that of the industry average and despite rising

competition, its wide sales and service network, strong brand position and ability to cater to various price segments have equipped Maruti to sustain its leader position in the industry.11
11 http://stockshastra.moneyworks4me.com/compan y-shastra-3/ 12 http://www.financialexpress.com/news/marutisuzuki-strengthens-rural-track-forgrowth/625127/ 13 http://www.rediff.com/money/2007/dec/21inter.ht m

4. COMPANY STRATEGY 4.1. GENERIC STRATEGY

Maruti's dominant strategy throughout years has been of providing value for price to its customers. It initially started with a cost leadership strategy with Maruti 800. Since then, it has launched numerous variants in different customer segments with the aim of each model providing unique value to the customer. Recently, it forayed into the luxury segment with its new model, Kizashi. Maruti has also had the advantage of being able to leverage its collaboration with Suzuki in the technology and R&D space. With Its vision to create customer delight and shareholders wealth, Maruti Suzuki has achieved great success in India because of its ability to recognize and serve the need of Indian customer before anyone else does.8

4.2. STRATEGIC INITIATIVES

To support it generic strategy and to stay ahead in the automobile space, Maruti Suzuki's corporate strategy is well aligned with the changing environmental dynamics. Some of the key initiatives taken by Maruti to capitalize on the changes in the industry in the recent years are: To counter the increased competition it was facing from global auto majors like GM, VW and Nissan and from low-cost models like Tata Nano, Maruti initiated a shift in its focus from

production to marketing and connecting with the customer. It enhanced its already-strong sales and service network and improved the technology in its product offering. To expand its customer base, Maruti increased its sales efforts in the rural areas and opened rural outlets with scaled-down investment to lower costs. Currently, rural sales to a fifth of the domestic sales.12 In addition to focusing on its mainstream products, Maruti has been promoting its Spares and Accessories business while ensuring customer retention by facilitating repurchase through Maruti TrueValue. The Indian automobile industry is expected to grow at a CAGR of 15% from FY11 to FY16. To cater to the expected increase in demand, Maruti has undertaken capacity addition and manufacturing facilities upgradation initiatives.13 The Indian automobile industry has had to cope with increasing petrol prices (and recently, a proposed hike in diesel prices), increasing environmental awareness and tighter emission norms. Maruti has started focusing on the role of alternative fuels in the automobile space, is expanding its diesel capacity and is promoting CNG cars.14 Maruti launched the first BS-IV compliant car in India and plans to setup an independent R&D facility in the country.15 To counter the impact of slowdown in the European Union on its exports, Maruti expanded its exports to other regions. The share of its non-EU exports increased from 20% in FY10 to 55% in FY11.16 ffd8ffe000104a464946000102 0100c800c80000ffe20c5849434 35f50524f46494c45000101000 00c484c696e6f021000006d6e7 4725247422058595a2007ce00 0200090006003100006163737 04d5346540000000049454320

7352474200000000000000000 00000000000f6d600010000000 0d32d48502020000000000000 0000000000000000000000000 0000000000000000000000000 0000000000000000000000000 0000000116370727400000150 0000003364657363000001840 000006c77747074000001f0000 00014626b7074000002040000 00147258595a0000021800000 0146758595a0000022c000000 146258595a000002400000001 4646d6e640000025400000070 646d6464000002c4000000887 67565640000034c0000008676 696577000003d4000000246c7 56d69000003f8000000146d656 1730000040c00000024746563 68000004300000000c7254524 30000043c0000080c675452430 000043c0000080c62545243000 0043c0000080c7465787400000 000436f7079726967687420286 3292031393938204865776c65 74742d5061636b61726420436f 6d70616e79000064657363000 0000000000012735247422049 454336313936362d322e31000 0000000000000000000127352 47422049454336313936362d3 22e3100000000000000000000 0000000000000000000000000 000000000
14 http://www.ndtv.com/video/player/news/dieselcng-fitted-car-demands-to-rise-maruti/199770 15 http://www.domainb.com/companies/companies_m/Maruti/20090515 _maruti_suzuki.html 16 http://www.mydigitalfc.com/companies/maruti %E2%80%99s-non-european-markets-strategypays-147

4.3. COMPETITOR STRATEGY

Maruti's closest competitor is Tata Motors. Tata Motors follows a differentiator strategy. It has been launching vehicles with numerous variants in the passenger vehicle segment. Models vary in features like size, design and fuel type. Also, Tata has a few models in the SUV segment and it has collaborated with foreign brands such as Jaguar to introduce models in more segments in the Indian market. The advantage that Tata Motors has is the access to one of the major raw materials for automobile manufacture steel. It sources steel from Tata Steel and thus, has a firm hold

on raw material supple due to backward integration of its parent company. This has accelerated increase of Tata Motors' market share. Specific to Tata Motors is the Blue Ocean Strategy. Following which the company doesnt try to foray deep into already existing segments or product line. Instead, it tries to find new market segments with its product development. A classic example of this is the launch of Tata Nano, a pioneer in low cost design and segment.

5. BRAND POSITIONING
Maruti's passenger vehicle models can be positioned in the cost-differentiation space as depicted below (arrows denote the direction of expansion of the range offered by the company): Figure 3: Positioning of Maruti Suzuki's models In line with their positioning, Maruti Suzuki's models can be classified as below: Low cost-Low differentiation Maruti 800 which was low priced and simple model Low cost-High differentiation Alto is differentiated on the basis of comfort and it has led to development of other two models Estilo and WagonR. These models are positioned along the comfort factor. Omni is differentiated on the basis of space and it led to the introduction of Eeco. Other models like A-Star, Ritz and Swift which differentiate on basis of style and premium looks. All models of this category are not low priced. This is Maruti's key operating segment. High cost-High differentiation Gypsy was the first model in this category and was differentiated on the basis of its sportiness. It was however priced higher than other models. At the moment, the same space is occupied by Grand Vitara, is a model with similar characteristics.

 High cost-Low differentiation This segment primarily includes models like SX4 and Swift Dzire. These models are similar to other passenger models but are luxurious and therefore costly. Maruti has entered the ultra luxury segment in India with the introduction of Kizashi. As can be seen from the figure, Maruti that started in low costlow differentiation space has expanded its territory to cover all the segments. Maruti's strength today lies in the low cost-high differentiation space. This strategy has helped Maruti counter the increased competition it faced from entry of foreign players and the changing consumer preferences for greater comfort.

6. RESOURCE-BASED VIEW OF MARUTI SUZUKI

Maruti Suzuki can be looked at as a bundle of resources and the VRIN framework used to determine key strategic resources available to it. For a resource to be strategically important, it should be valuable ('V'), rare ('R'), inimitable ('I') and non-substitutable ('N').17 This can be further extended to pre-empt the treats Maruti might face in the future.
17 Barney, J. B. 1991. Firm resources and sustained competitive advantage. Journal of Management, 17(1): 99-121.

6.1. VRIN FRAMEWORK

Maruti Suzuki's key strengths as identified and analyzed by the VRIN framework are below:

DISTRIBUTOR AND DEALER NETWORK & SALES FORCE

As on 31st March, 2o1o Maruti had a sales network of 802 centers in 555 towns and cities and a network of 2,740 workshops in over 1,335 towns and cities to provide customer service support. It also has state-of-art showrooms across many cities with a trained workforce and sales personnel that makes it easy, convenient, and comfortable to research, test drive, and buy a car. All

dealers and distributors are also associated with recognized financial advisors to support the car buying process of customers. It is further focused on expanding the sales and service across the country and has firmed up a blueprint for expansion by 45% over the next three years. This supports its expectations of higher sales in urban areas and further penetration rural India. This is backed by a 17% sales contribution from the rural areas where Maruti was the first automobile manufacturer to turn its focus.18 This strength falls under all four VRIN categories and is thus a sustainable competitive advantage.
18 http://blog.carazoo.com/2010/06/marutisuzuki-to-increase-its-dealership-network-to1000.html

BRAND VALUE

Maruti Suzuki is the best known brand in the Indian passenger vehicle space and it stands for value as much as it stands for performance. Taking into account the resale value, driving and maintenance cost, the price of a car is just a third of its overall value. Maruti's brands are rated the best across the segments they operates in.8 Maruti's brand image is a sustainable competitive advantage for it and over years, the company has worked to strengthen and maintain its brand image.

CUSTOMER BASE
Maruti has a huge, loyal customer base that provides deep insights into various aspects of car design and comfort. Over their lifetime, many customers move from low-cost segments to high-cost segments and Maruti's excellence in automation, aftersales service and performance enables customer retention. This is again a sustainable competitive advantage, as showcased by the JD Power Customer Satisfaction Study, 2009 where Maruti was ranked

first in customer satisfaction for ten years in a row.8

TECHNOLOGICAL ADVANTAGE
Maruti Suzuki benefits in the technology and R&D space from its collaboration with Suzuki Motor Corporation, its parent. The company consciously adopts energy efficient technologies and its existing equipments are continuously modified to reduce energy consumption. Some of the internal initiatives taken by Maruti include installation of energy efficient furnaces in the Gurgaon casting plant, energy efficient lighting, rationalization of natural gas input and commonization of electrical motors. These have also helped the company cut down on its costs. In line with the stricter environmental norms, Maruti was the first automobile company to launch a BS-IV compliant car in India.

6.2. TETRA-THREAT FRAMEWORK

The strategic resources identified using the VRIN framework have to be safeguarded to ensure continued superiority. An analysis using the tetra-threat framework is used to identify the areas, both internal and external, where Maruti Suzuki might face credible threat in the future. The kind of threats can be classified as that of imitation, substitution, slackness and hold.

IMITATION THREAT - HIGH

Throughout its existence, Maruti Suzukis generic strategy was that of cost leadership. Maruti was the first low cost car provider in India and its models like Maruti 800 (priced around Rs. 2 lakh) and the Alto have been the best selling cars in the segment.19 As other automobile manufactures look to replicate Maruti's success in the low cost segment, Maruti faces considerable threat to its leading position. An example

was the launch of Tata Nano by its key competitor.20 In further attempts to beat Maruti at its own game, the competitors are looking to strengthen their retail base in small towns and cities to match that of Maruti. Also, as its competitors have access to the same low cost and high quality supply chain, there is a possibility of imitation of its products.
19 http://business.rediff.com/slideshow/2010/mar/10/slide-show-1-auto-the-top-6best-selling-cars-in-india.htm 20 http://ibnlive.in.com/news/ratan-tata-launchesnano-in-mumbai/88445-25.html 21 http://articles.economictimes.indiatimes.com/201 1-08-11/news/29876484_1_cheapest-car-lowcost-segment-small-car/2 22 http://www.indiancarsbikes.in/cars/dealsealed-fiat-supply-100000-multijet-dieselengines-maruti-suzuki-54808/ 23 http://www.thehindubusinessline.com/opinion/arti cle2531927.ece 24 http://www.edynamic.net/home/News/News11.as px

Thus, Maruti faces a high threat of imitation on various fronts. To tackle the treat of imitation in the low cost segment Maruti is planning to launch a new model 'Cevra' in the ultra low cost segment.21

SUBSTITUTION THREAT MODERATE

The use of common technology in the automobile industry and the fast-paced upgradation of technologies increases the substitution threat faced by the automobile manufacturers. Post the global demand slowdown, global car makers like General Motors and Volkswagen have entered the Indian market leading to tough competition for Maruti. Maruti is thus facing a moderate level of substitution threat in its customer base in urban areas. To counter this, Maruti has turned to the rural consumer base.

HOLDUP THREAT - LOW

Since most automobile manufacturers source most of the components from their suppliers and assemble them to make the final product, suppliers are a vital link in the value chain. Maruti Suzuki works jointly with its suppliers to develop new products,

achieve high localization levels and to reduce cost. It has a strong base of 246 suppliers including 16 JV companies in which it has strategic equity stakes.8 Maruti continues to give due importance to vendor management by consolidating its vendor base abd by encouraging its vendors to set up R&D facilities. Additional deals such as a recent JV between Suzuki Motor Corp and Fiat enabling Maruti Suzuki to source Fiats 1.3 litre-multijet engine keep the holdup threat low.22 Temporary issues like the labour unrest at Maruti's Manesar plant due not pose a credible threat to Maruti.23

SLACK THREAT - LOW

Despite being a long standing market leader in its space, Maruti's internal operations do not exhibit any slackness. Maruti has a highly experienced Managing Director Mr. Shinzo Nakanishi leading the company and the company imparts regular training for its in-house employees, dealers and vendors. Maruti is increasingly integrating its manufacturing system with information technology and has improved its shop floor efficiency by introducing a new vehicle tracking system.24 As long as the operational efficiency within the organization is kept high, the threat from slack in low.

7. FUTURE SCOPE AND RECOMMENDATIONS

The Indian automobile industry is slated to change dramatically over the next decade, with increasing fuel costs, rising incomes and the introduction of new lost-cost and high-end foreign models. Maruti Suzuki India has a sound internal structure and linkages with its suppliers in place to handle the emerging threats and competition. Also, it already has strategies in place to counter some of these effects. However, in addition to the threats it has

identified, Maruti has to cater to the changing needs of the Indian consumer. As an example, an increasing number of consumers are looking for safety features such as air bags in their cars and are not willing to compromise on safety for lower cost.25 None of the Maruti models, as of now, offer such features and it is a competency Maruti should look to build. As long as Maruti is able to effectively capitalize on the changing dynamics, it should be able to retain its leading market position.
25 http://www.motorbeam.com/news/marutisuzuki-taking-a-beating-from-the-competition/