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    A term paper on : Maruti Udyog Limited

    Term Paper submitted by:

    Jaspreet Singh Mithra

    MBA / 13 / 2005

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    Contents 1. Phase I

    1.1 Evolution of the Indian Passenger Car Industry 1.1.1 Marutis Entry into the Indian Passenger Car Markets 1.1.2 Dynamics of Market

    1.2 Car Market Classification 1.2.1 Price Based Classification 1.2.2 Length Based Classification

    1.3 Marutis Offering & Competitors in Different Segment 1.4 Factors Determining Competition in Indian Passenger Car Industry 1.5 Factors Affecting Demand for Indian Passenger Car

    2. Phase II 2.1 Industry Overview

    2.1.1 Global Passenger Car Industry 2.1.2 The Indian Passenger Car Industry

    2.2 Sector Outlook 2.3 Future Scope

    3. Phase III 3.1 MULs Vision 3.2 MULs Business Strategy 3.3 MULs supply chain 3.4 Information Technology 3.5 Marketing 3.6 Research & Development 3.7 Manufacturing

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    PHASE I

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    Evolution of the Indian Passenger Car industry: During 1960s and the 1970s there were only two manufacturers in the market, Hindustan Motors and Premier Automobiles with limited production capacities. The import of passenger cars was restricted to the State Trading Corporation (STC) and foreign diplomats. During that period the passenger car industry in India grew at a nominal CAGR of approximately 3.6%. The rate of customs duty levied on cars was 225%. Marutis entry into the Indian Passenger Car Market: MUL was the result of the joint venture created in February 1981 between Japan's Suzuki Motor Company and the Indian Government when the latter decided to produce small, economical cars for the masses.

    The intention of the venture was to produce a 'people's car'. To get the project off the ground MUL took over the assets of the erstwhile Maruti Ltd., which was set up in 1971 and closed in 1978.

    It was on December 14, 1983 that MUL launched the first Maruti vehicle - the Maruti 800. The first model was the SS80, a 796cc hatchback car priced at Rs. 47,500.

    Subsequently, in spite of price hikes, the car has remained within the reach of the Indian middle class and has been a runaway success. Available in vibrant colures when India's passenger car population comprised mainly Ambassadors and Fiats in black and white, M800 gave Indians the first taste of global quality and reliability.

    In late1980s, Suzuki increased its equity stake in MUL from 26% to 40% and further to 50% in 1992, converting Maruti into a non-government company.

    In the years that followed, MUL consolidated its position with a line of Indian classics, such as the eight-seat Omni, the rough-terrain Gypsy, and, in October 1990, a 3-box Maruti 1000. MUL took the lead in the green drive by launching its CNG-run Omni and Maruti 800 in 1999.

    MUL redefined the premium compact segment with the launch of the Zen in October 1993. It was the company's first 'world car, selling across multiple markets. A year later, the Zen had won several awards, including 'No. 1 car in Europe' (Auto Week, 1994), 'No.1 import in Europe' (1997) and 'most fuel-efficient car' (ADAC).

    In 1999, MUL launched Baleno and WagonR. Baleno targeted the premium mid-segment while WagonR was positioned as a multi-activity vehicle.

    In1999, to improve customer satisfaction, it even established a chain of model workshops and soon after, set up customer call centers in the metros.

    In 2000, Maruti Suzuki introduced Alto - a premium small car targeting the export market - and in October 2001, Versa, a multipurpose vehicle.

    In May 2002, Suzuki took management control of Maruti.

    In April 2003, MUL rolled out its latest offering, the Grand Vitara XL-7, a luxury SUV imported from Suzuki Motor Corporation. The Grand Vitara was a concept that was radically different from the models that comprised the bulk of MUL's sales.

    Since 1980 with its product excellence, operational efficiency and customer intimacy Maruti Suzuki has been the leader in Indian passenger car market.

    Main objectives of MUL as set forth in their Memorandum of Association are: 1.To acquire and take over from GoI the right, title, and interest in relation to the undertakings of Maruti Ltd. as provided for in the appropriate enactment of GoI together with the liabilities of GoI so far as they are related to the Undertakings of the Company.

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    2. To carry on the business of manufacturers of, and dealers in, automobiles, motorcars, lorries, buses, vans, motorcycles, cycle-cars, motor, scooters, carriages, amphibious vehicles, and vehicles suitable for propulsion on land, sea, or in the air or in any combination thereof and vehicles of all descriptions (all hereinafter comprised in the term motor and other things), whether propelled or assisted by means of petrol, diesel, spirit, steam, gas, electrical, animal, or other power, and of internal combustion and other engines, chassis-bodies and other components, parts and accessories and all machinery, implements, utensils, appliances, apparatus, lubricants, cements, solutions enamels and all things capable of being used for, in, or in connection with manufacture, maintenance, and working of motors and other things or in the construction of any track or surface adapted for the use thereof. 3.To carry on the business of garage keepers and suppliers of and dealers in petrol, electricity and other motive power for motors and other things. 4.To carry on in the business of iron founders, mechanical engineers, and manufacturers of machinery, tool makers, brass founders, metal workers, boiler makers, mill rights, machinists, iron and steel converters, smiths, wood workers, builders, electroplaters, chromium platers, lacquerers, enamellers, painters, metallurgists, electrical engineers, and printers and to carry on any branch of manufacturing and engineering business.

    Share Holding Pattern After MUL IPO:

    Dynamics of Market:

    Initially Maruti was operating in the market which was the part of a closed economy but with the opening of economy market scenario has changed dramatically and is at an interesting juncture where both challenges and opportunities are immense. According to the statistics available, Indian car market is one of Asia's largest and most competitive markets. Over 1,030,068 passenger cars, multi and sports utility vehicles were sold during 2003/04 resulting in the market growth of about 32%. With such immense growth opportunity the Indian automobile market has finally caught the fancy of big players which are eager to capture the India automobile market at any cost. And as such Maruti is having a tough competition from the new players, including Hyundai, GM and Honda of Japan. In the last quarter of 1998 these new entrants in the market had launched an unprecedented assault on the B segment of the market.

    Daewoo launched the Matiz Hyundai launched the Santro. Santro Xing specially created a fresh excitement in the B segment.

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    Telco launched the Indica Around the same time, Fiat slashed the prices of its Uno and launched a Diesel variant. Hyundai has also launched

    Getz.

    General Motors is also planning to launch new variants. Fiat has reworked the engine of the Palio and is planning to launch another B segment product. And then, there are Honda and Toyota. It is also predicted that Honda Motors India will be also launching its small car, Life, in India.

    Along with the intense competition there are other factors which have made the conditions worse for Maruti

    After almost 18 years, the 800 is on its last legs. This is particularly important as Tata Motors is serious about an entry-level car at Rs 1 lakh.

    Over the years, MUL's brand value had begun to erode. It is seen as a small-car maker only. Maruti was having nothing to offer to the booming market for people carriers in India - Sumo, Qualis, et

    al. For this segment Maruti launched Versa. Launched as a higher end alternative to the Omni, it was expected to click. But the Versa bombed. Launched with sales expectations of a 1,000 units every month, it did about 100.

    The other launch, the Baleno, went up against the Hondas and the Mitsubishis, and lost money from Day One.

    In an industry where cars get minor facelifts every year, a major reworking every two to three years, and are replaced every four or so years, the Zen has remained almost unchanged since 1993.

    It seems that even consumer are having problem equating Maruti with premium. Since MUL had exhausted all of Suzuki's high-end products, it is finding itself unable to cope with the

    frequent upgrades and relaunches. Even when the government's stake in Maruti has come down, the interference will not decrease as seen

    with other institutions like VSNL and MTNL. Considering Hyundai's emerging status in the Indian market and the lack of government involvement, it

    could turn out to be a better pick than Maruti. Maruti is also facing problems linked to its higher end mid-sized (segment C) models. Maruti's share in

    this segment has fallen from 30 per cent in 1999-00 to 16 per cent in 2002-03.Maruti currently has three cars in segment C -- Esteem

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