INTEGRATED ASSIGNMENT

ON

MARUTI SUZUKI SX4

Project Guide: Submitted By:

Dean Athar Ali Pankaj Bhardwaj

Prof. Vinay Jha Preet Kanwar Sethi

Ms Shalini Aggarwal Megha Goel

Ms Malini Chakravarty Kamini Bhardwaj

Sangeeta Yadav

SESSION: 2007 – 2009

K.R.MANGLAM GLOBAL INSTITUTE OF MANAGEMENT

(KGIM)

PREFACE

Our comprehensive study on Maruti Suzuki SX4 is mainly

about application of theoretical knowledge to practicality. It

also gives the detailed study of environmental factors which

effect the organization.

ACKNOWLEDGEMENT.

PROJECT WORK IS NEVER THE WORK OF AN INDIVIDUAL IT IS MORE A

COMBINATION OF IDEAS, SUGGESTION, CONTRIBUTION AND WORK

INVOLVING MANY FOLKS. ONE OF THE MOST IMPORTANT PARTS OF

WRITING A REPORT IS TO THANKS THOSE WHO HAVE CONTRIBUTED

TO IT.

OUR FIRST THANKS MUST GO TO MR VINAY JHA , WHO WAS MY GUIDE

FOR THE EXCELLENT ADVICE, GUIDANCE AND ENCOURAGEMENT

GIVEN TO ME DURING THE ENTIRE COURSE OF PROJECT WORK.

WE WOULD LIKE TO THANKS ALL MY FRIENDS, COLLEAGUES AND

RESPONDENTS WHO HAVE DEVOTED THEIR VALUABLE TIME TO MAKE

THIS REPORT SO GOOD.

TRULY

Pankaj Bhardwaj

Preet Kanwar Sethi

Mehga Goel

Kamini Bhardwaj

Sangeeta Yadav

TABLE OF CONTENT

SERIAL NO TOPIC

1. INTRODUCTION

2. PRODUCT INFORMATION

3. OBJECTIVE OF THE STUDY

4. METHODOLOGY

5. FINDING & OBSERVATIONS

6.

COMPARISIONS OF

FINANCIAL STATEMENT

7. ANNEXURES

INTRODUCTION

Maruti Suzuki India Limited (MUL) was established in Feb 1981 through an Act of

Parliament, as a Government company with Suzuki Motor Corporation of Japan holding

26 per cent stake. It was entrusted the task of achieving the following:

Modernization of the Indian Automobile Industry.

Production of vehicles in large volumes

Production of fuel efficient vehicles.

Suzuki was an obvious choice because of its unparallel expertise in small cars.

The Joint Venture agreement was signed between Government of India and Suzuki Motor

Company (now Suzuki Motor Corporation of Japan) in Oct 1982.

The company went into production in a record time of 13 months and the first car was

rolled out from Maruti Suzuki India Limited Gurgaon in December, 1983.

VISION STATEMENT

CORE VALUES

MARUTI SUZUKI SX4

ABOUT THE PRODUCT (SX4)

 Maruti launches the premium SX4 Sedan  

Car market leader Maruti Udyog launched SX4 sedan, a bold, muscular and feature-

packed car, powered by the global M-series engine and built on a brand new platform.

SX4 sedan is the second global car, after the Swift, from Suzuki Motor Corporation, the

parent company of Maruti Udyog. SX4 Sedan is making its debut in India, before being

launched in Europe and Japan.

Speaking at the launch Mr. Jagdish Khattar, Managing Director & CEO, Maruti Udyog,

said “SX4 sedan is just the right car with which Maruti Udyog can reinforce its presence

in the A3 segment and enhance its leadership”.

He added: “The large number of customers who bought our compact cars 4-5 years ago,

and also Esteem and Baleno customers, will now choose the SX4 as the next upgrade

option. Besides, people who like to own a Maruti Suzuki car, but were considering

moving to competitors because we did not offer an A3 segment car of their choice, will

now choose the SX4 sedan”.

The SX4 sedan is being launched soon after Maruti Udyog has completed its best year

ever (2006-07) in terms of sales, financials, investment milestones and model launches.

All the company’s three new launches last year – WagonR Duo, Zen Estilo and Swift

Diesel --- achieved record success.

Global car with Global Engine

The SX4 sedan is fitted with an advanced M series engine. The M-series represents the

future of Suzuki’s engine technology. It is designed to be compliant to Euro 4 and Euro 5

norms in future. Suzuki has developed this engine by picking up the best features of the

engine series used so far in Suzuki vehicles and incorporating them in this latest series.

The 4-valve, 1.6 liter engine will produce a maximum power of 102 bhp @5500 rpm.

The engine also has a high torque of 145Nm @4200 rpm, which makes driving

comfortable.

Xtra large

The SX4 sedan is the tallest, widest and the longest car in its class. It comes with the

widest tyres, and a boot space of 505 liters. The ground clearance of SX4 sedan is 190

mm, the highest in the A3 segment.

Feature packed sedan

SX4 sedan is equipped with features that impart aesthetics, status, convenience and

safety. It offers a music system integrated with the dashboard, with audio control on the

steering wheels. In addition, auto climate control system provides comfort and

convenience. The antenna is embedded in the glass, further enhancing aesthetics of the

car. An illuminated key insert and variable instrument illumination are among the other

unique features of the SX4 sedan.

The SX4 sedan is available in two variants: Vxi and Zxi. In addition, Zxi comes with the

option of a leather pack comprising leather seats, leather steering cover and leather door

trims. The SX4 is available in seven vibrant colors.

The “S” in “SX4” stands for Sport. “X” denotes RelaX. “4” denotes 4-seasons drive.

Safety

The SX4 sedan is fitted with safety features like ABS, EBD and Dual SRS airbags. It also

has front and rear side door impact beams. Safety is enhanced through seat belt pre-

tensioners and force limiters .

In the internal EURO NCAP testing, the SX4 sedan has got a high rating of 4.

The upright, theater seating in SX4 sedan provides better visibility.

The immobilizer, a state-of-the-art anti theft device, has also been installed in the SX4

sedan.

SX4 sedan and Maruti engineers

The localization level of SX4 sedan is 79%. Maruti’s engineers have contributed in

making the car suitable for Indian conditions, especially in critical areas like suspension

tuning, ground clearance, engine tuning and seat comfort. Interiors have been toned to the

taste of Indian customers.

The SX4 sedan will be manufactured at Maruti Udyog’s state-of-the-art manufacturing

facility at Manesar, which was formally inaugurated in February 2007.

Suzuki Motor Corporation and SX4 Sedan

The SX4 Sedan is a significant model for Suzuki Motor Corporation as well, as the

company evolves from being the leading mini car maker in the world, to a complete car

maker.

Recent Suzuki cars, including the Swift and now the SX4, come with a more aggressive,

curvy and bold design. The European design influence is clearly evident. This is a

deliberate shift from the staid and straight lines, traditionally seen in Suzuki models.

Alongside the conscious shift in product design, Suzuki has taken other initiatives in its

evolution, including entering the World Rally Championship.

It has also embarked on developing “global cars” like Swift and SX4 which, while

exuding an international and contemporary feel, are tuned to domestic requirements of

individual markets.

Price

The SX4 Sedan has been priced aggressively as an introductory offer.

Model City EX-SHOWROOM (Rs)

SX4 Vxi Delhi 618000

SX4 Zxi Delhi 689000

SX4 Zxi leather Delhi 724000

 

OBJECTIVE OF THE STUDY

Bringing theoretical knowledge of different subjects into practical

implication.

To understand the environment of the company.

Collection of primary & secondary data for the purpose of analyzing and

interpreting on various grounds such as demand analysis, demand

forecasting etc.

Making comparisons with the competitor.

METHODOLOGY

Primary data: By way of interaction with the dealer sales assistants,

dealer sales executives. Market segment is done and personals of West

Delhi showrooms (Marketing times, D.D motors, Competent motors) are

interviewed.

Secondary data:

Website: www.marutisuzuki.com

www.tatamotors.com

www.autoindia.com

www.businessline.com

Journals: Marketing 4p’s.

FINDING AND OBSERVATIONS

Corporate Social Responsibility

IDTR

IDTR (Institute of Driving, Training and Research) is a professional school for driving,

managed and sponsored by MUL. It conducts one-day courses for both learners as well as

those wanting a refresher course. The institute is well equipped for both practical as well

as theoretical training using TV and other visual aids. Successful participants get an

IDTR certificate, which enables them to procure a driving license from the regional

transport office.

Interceptor Vehicle

Maruti has also assisted traffic enforcement in Delhi through the sponsorship of Traffic

Interceptors. Conceived by the Institute of Road Traffic Education (IRTE), the

Interceptor project is being implemented in conjunction with Delhi Transport

Department, the Delhi Traffic Police and Maruti Suzuki India Limited. Three Maruti

Interceptors equipped with State-of-the-art surveillance equipment were put on the roads

in January 1999, taking the total number of interceptors in Delhi up to 8.

The Maruti Suzuki Traffic Beat

Started in New Delhi in June 1995, Maruti Suzuki Traffic Beat on AIR FM is an

innovative radio programme aimed at providing listeners with a regular and reliable

update of the traffic situation. It was extended to Chennai in July1999. The information is

relayed by the Traffic policemen to the Traffic Police Headquarters where it is collected

and collated, to commuters through AIR FM. Besides helping ease peak rush-hour traffic

congestion, the programme also incorporates handy motoring and car care tips for the

listener, enabling him to improve his driving skills and look after his vehicle better.

School Initiatives

To ensure that children later become responsible drivers, Maruti has begun producing

several films on the safety of roads. These films have been sent to over 300 schools in

Delhi, Chandigarh and Kolkata. To take the initiative further, we have sent road safety

posters to schools. We have also sponsored painting competitions and All India School

Quizzes with emphasis on the environment and traffic safety.

Handbook of Safe Driving

Chief among Maruti's initiatives towards the NTC of Delhi is the Handbook of Safe

Driving, which was produced in conjunction with the State Transport Department. The

booklet is published in Hindi and English and provides comprehensive details on safe

driving. It is distributed free of cost in the NCT of Delhi at all Licensing Authorities. A

similar booklet has also been produced for Chandigarh.

Social films

Maruti Suzuki India Limited commissioned a series of films in 1997 as part of its drive to

develop socially relevant communication related to traffic habits, driving habits,

environment, pollution, safety measures and vehicle maintenance.

The films, numbering 36 in all, helped bring traffic and environmental concerns to the

fore in an interesting and innovative manner. These films target all kinds of vehicle users

and pedestrians. Aimed at informing and educating the masses at large, the ultimate aim

of the campaign is to try and improve upon the prevalent traffic situation in India.

These films have been screened on Doordarshan (National Channel and Metro) and

various satellite channels across India, helping raise awareness not just in metros but also

in other areas. The London International Advertising Festival Award, the prestigious

Bombay Advertising Club award, the A&M Award and the CAG Award are a few of the

many awards won by the infomercials for their innovative use of the televisual medium to

highlight social concerns.

Maintenance of Children Park

Maruti Suzuki India Ltd maintained and managed Children's Park at the India Gate, is a

popular learning and recreation spot among children . The park adjacent to India Gate is

spread over 14 acres, is at the polygon between Dr Zakir Hussain Marg and Shah Jahan

Road. More than 2500 children visit the park every week. Based upon the theme of

EDUTAINMENT(education + entertainment).The park plays host to a variety of

facilities, as science centre, a well equipped library with latest children books , a maze

hedge and an open air amphitheatre and a very special herbal garden . All this is set

amidst beautifully landscaped greenery The Musical & a story telling fountains are a

major draw for the children.

There are 4 exclusive play areas complete with swings and other play equipment which

appeal to all children.

Maruti Udyog Ltd regularly plays host to various activities as painting, dance and singing

competitions for all junior schools.

NGO's are also welcome for conducting events for underprivileged children

EDUCATIONAL BENIFITS

DPS

Through the Maruti Employees Education Trust (MEET) we have set-up a well equipped

modern school in association with Delhi Public School Society (DPS) at Maruti Kunj

(Bhondsi), Gurgaon.

This school will go a long way in providing quality education not only to the children of

the employees at Maruti but also to the citizens of Gurgaon.

Education to underprivileged

DPS Maruti Shiksha Kendra, an education programme for the underprivileged, was

inaugurated at DPS, Maruti Kunj recently. The objective of his project is to educate the

children of below poverty line (BPL) families from the nearby villages of Gurgaon

district. 190 students in the age group of 5-12 years (classes’ I-V) have already enrolled.

DPS Maruti Kunj is providing books, writing material and uniforms, refreshment and

transport facilities to these children.

Education Programme for mothers

'Chetna', an education programme for mothers - is another endeavor to provide basic

education to mothers of the students of DPS Maruti Kunj and surrounding villages.

Majority of students at the school are first generation learners. Therefore, the concept of

starting a movement of learning 'Chetna' for mothers has been promoted. The response

has been encouraging.

SOCIAL WELFARE

Welfare Campus

Every year we organize blood donation camps along with Red Cross, in which employees

donate blood. Eye check-up camps, family planning related camps and other health

camps are also organized periodically.

Medical support & welfare

The employees of Maruti have always donated generously to people affected by natural

calamities. They contributed Rs. 2 million to rehabilitate earthquake victims in Latur. We

also run a crèche for the children of construction workers, which provide food shelter and

education for 85 children.

Education to underprivileged

DPS Maruti Shiksha Kendra, an education programme for the underprivileged, was

inaugurated at DPS, Maruti Kunj recently. The objective of his project is to educate the

children of below poverty line (BPL) families from the nearby villages of Gurgaon

district. 120 students in the age group of 5-8 years have already enrolled. DPS Maruti

Kunj is providing books, writing material and uniforms, refreshment and transport

facilities to these children.

Education Programme for mothers

'Chetna', an education programme for mothers - is another endeavor to provide basic

education to mothers of the students of DPS Maruti Kunj and surrounding villages.

Majority of students at the school is first generation learners. Therefore, the concept of

starting a movement of learning 'Chetna' for mothers has been promoted. The response

has been encouraging and about 130 mothers are attending it regularly

ENVIRONMENT CONCERN

Maruti Suzuki India Ltd. is committed to:

Maintain and continually improve upon our Environmental Management system

and performance.

Prevention of pollution resulting from our business activities and products.

Strictly adhere to environmental laws and further follow our own standards.

Recognizing our responsibility to provide a green and safe environment, we put

forward following action guidelines:

Promote energy conservation

Promote three R's (Reduce, Reuse, Recycle)

Promote "Green" procurement

Provide environmental education to all the personnel working for or on the behalf

of Maruti Udyog Limited

Since the commencement of operations in 1981 we've been committed to the protection

of the environment and conservation of non-renewable energy sources. Our proactive

approach depends not only upon meeting the expectations of the regulatory authorities

but achieving the high standards that we've set as a responsible corporate citizen.

This philosophy of trying to make a difference to the environment penetrates through our

employees to the process of manufacture and finally into our products.

Pollution Control Camps

Our elaborate system of Free Pollution Check-Up Camps which run at regular intervals,

is designed at making the cars already on the road operate more efficiently. It also

inculcates awareness for environmental protection among the many car users of India.

MPFI

We have introduced Euro II compliant MPFI engines in all our models. Along with our

vendors, we've made investments of over Rs. 60 million for introducing MPFI

technology compliant cars.

CNG

Maruti is a strong advocate of CNG, a more eco-friendly fuel alternative to diesel and

petrol. In our endeavor to provide a cleaner and greener option to the customer, we are in

the process of equipping an extensive dealer network to assist Maruti owners in fitting

CNG kits.

Rain Water Harvesting

To recharge the aquifer, measures were taken to harvest the rain water through soak pits,

recharging shafts and water lagoons. These measures are capable of charging nearly 50%

of the average annual rainfall at Maruti, into the Earth.

Post Script

Our social efforts were a key factor in the company being awarded the CII-EXIM

Business Excellence Award in November 1998. Maruti is only the second company to

have won this prestigious award which covers all aspects of a company's operation, and

pays considerable attention to the company's social and environmental efforts.

ETHICS

To adhere to a code of business, ethics and values. To serve as a role model in support of

corporate policies and professional ethics in our dealings with all our stakeholders

To co-operate and collaborate with colleagues in order to achieve company objectives.

To work effectively with others irrespective of position, department, etc

To deliver as promised and to adhere to commitments. To meet deadlines, and take

responsibility for actions and admit mistakes. To work effectively with little or no

supervision.

To honor rather belittle the opinion of work of others, regardless of their status or

position in the organization. To support the growth and development aspirations of

individuals.

ENVIRONTMENTAL FACTORS

Affecting Demand of SX4

1. Price: When compared with its closest competitor like Honda city zx(vtec),

Hyundai Verna, Tata indigo(XL). The price of sx4 is lowest among its

competitors.

Name Maruti Suzuki Sx4 Honda City (vtec) Chevrolet Aveo

Price(in lakhs) 6,92,990 8,00,000 7,02,831

2. Features: Additional features are being provided by SX4 as and when compared

with the competitors. Climate control , cruise control, boot space are few of them.

Also the SX4 sedan is fitted with safety features like ABS, EBD and Dual SRS

airbags. It also has front and rear side door impact beams. Safety is enhanced

through seat belt pre-tensioners and force limiters .

In the internal EURO NCAP testing, the SX4 sedan has got a high rating of 4.

The upright, theater seating in SX4 sedan provides better visibility.

The immobilizer, a state-of-the-art anti theft device, has also been installed in the

SX4 sedan.

SX4 sedan and Maruti engineers

The localization level of SX4 sedan is 79%. Maruti’s engineers have contributed

in making the car suitable for Indian conditions, especially in critical areas like

suspension tuning, ground clearance, engine tuning and seat comfort. Interiors

have been toned to the taste of Indian customers.

3. Taste and preference: Survey shows that Indians ranks more on account of

trustworthiness and reliability on Maruti as first Indian automobile company.

Sales data collected also states that SX4 is preferred most in C segment cars.

4. Technology: The SX4 sedan is fitted with an advanced M series engine. The M-

series represents the future of Suzuki’s engine technology. It is designed to be

compliant to Euro 4 and Euro 5 norms in future. Suzuki has developed this engine

by picking up the best features of the engine series used so far in Suzuki vehicles

and incorporating them in this latest series. The 4-valve, 1.6 liter engine will

produce a maximum power of 102 bhp @5500 rpm. The engine also has a high

torque of 145Nm @4200 rpm, which makes driving comfortable. The upgraded

technology of SX4 gives an edge in increasing its sales volume.

5. Discounts: Timely heavy discounts are being provided by the company on its

products such as yearend discounts, festive seasons discounts etc.

6. Interest Rate: With the reforms from the government side mainly to strengthen

the industry sector the interest rates were reduced in the monetary policy to

increase the demand for the product. Thus lower interest rate attracted more and

more of customers to buy cars and thus adding to the demand of the product.

7. Income Factor: In a country like India were wealth is not equally distributed and

majority of the people constitute the middle and lower class people and the car

falls in the category of upper segment thus automatically reduces the demand for

the product.

8. Location: Showrooms having convenient location are having more demand of the

product as compared to those whose location is not good.

Affecting Supply of SX4

1. Company’s production Capacity: The Company producing more number of

units will have an edge over its competitors in the supply for its product. As if the

demand for the product is more in the market and the production capacity of the

plant is less then definitely the customers will shift buying the substitute product

because the product will not be available in the market. So when we compare the

production capacity of Maruti with TATA the former is having an edge over it.

2. Competitor’s advantage: In order to maintain a competitive edge (in terms of

low price) over its competitors company will try to produce more units in

anticipation of the high demand because of low prices set by the company. Maruti

SX4 price is lowest when compared with the competitors.

3. Technology: An upgraded technology creates a synergy for the company to

produce more with low cost and high in efficiency thus increasing the supply for

the product. Maruti is enjoying this synergy.

4. Time period: In off seasons company generally adopts the strategy of decreased

supply of the product because of the low demand. In the same way during peek

period attempt is to increase the supply to make the product easily available to

meet the increased demand.

5. Raw material availability: Easy and cheap availability of raw material for

production directly helps in increasing the supply of the product as if the company

is producing at low cost will tend to sell more of the product.

Type of market structure

Oligopoly: It is a market form in which there are a few large sellers of the commodity,

producing homogeneous or differentiated products and intensely competing each other.

Features of oligopoly:

1. Number of firms: Under oligopoly there are few firms it is generally seen

between 10 to 20.Also firms operating in A3/ c segment fall within this range thus

satisfying this condition of market structure.

2. Nature of product: The product can be homogeneous or differentiated. Under

this the nature of product is same that is A3/ c but product differentiation is done

on the basis of brand name and features.

3. Entry conditions: Under oligopoly there are strong barriers for entering. Also in

automobile industry strong barriers are imposed by the existing players as in they

try to acquire the new firm also these firm are forced to shut down there operation

They do this by reducing the price of there product thereby taking all the demand

of their product making them to suffer looses.

4. Pricing policy: Under oligopoly firms have considerable control over the prices.

Same is the case with automobile firms they set the price keeping in mind various

determinants of demand and supply.

5. Size of the market: This also satisfies the condition of oligopoly as the potential

market for automobile industry is very large.

6. Competition: There is intense competition amongst the different players. Also in

automobile industry there is intense competition such as Maruti competing with

TATA, Honda SIEL etc in the segment of A3/ c.

Barriers that industry offers

Government policy and regulations: Every company has to abide by the various

government policy and regulations if they have to operate and this sometimes

becomes the barrier for any new entrant.

For instance:

NVH(Noise Vibration Harshness) norm: It states that the three factors i.e noise,

vibration and harshness should me minimum in the automobile and this requires

a huge investment in the form of advanced machinery.

Bharat Stage III norm: States that vehicle should be less polluting. Also heavy

penalties are being paid by almost every automobile firm because of not abiding

this norm as this is unavoidable.

Capital requirements: For any new firm to enter into automobile industry

requires a huge amount of capital because of heavy machinery required for the

production. Also automobile industry is more of a capital intensive. This was also

the basic reason that government restricted the entry of private players in

automobile industry before 1991.

Proprietary products and knowledge: Vast knowledge is required for any new

entrant before he decides to enter into the automobile sector in various fields such

as norms, from where to take the raw material, best location for the plant that

minimizes the transportation cost.

Economies of scale and other cost advantages: It is very difficult for any new

firm to generate economies of scale or other cost advantage because for this they

have to produce in bulk and this requires a huge capital and demand for the

product but this is very difficult for new firm to shift the customers towards them

when already huge giants are operating in the market.

Switching costs and brand identity: In automobile industry the mere existence

of the firm depends upon that is the brand they are offering is identified in the

market or not. As it has direct impact on the demand for the product, higher brand

identification results in higher demand. And for this any new firm has to spend

heavily on promotion.

Increased customer demand: Now customer is demanding for new model in

short period and this becomes a big barrier for any new entrant to generate new

models in short span of time.

Innovation: Huge amounts are being spend by different competitors on research

and development so that they can attract more customers towards there product.

Maruti is spending heavily on this. Maruti was the first to bring aluminium

engine in ZEN, MPFI engine.

DETERMINATION OF PRICE AND OUTPUT UNDER OLIGOPOLY

Cournot Model

The Cournot model (1838) is one of the earliest models of oligopoly behaviour, of which

the two underlying assumptions are that firms operate simultaneously, and that the firm

sets its output level based on the expected output of its competitors. The other

assumptions are that the product is homogeneous, and that there are two firms in the

market, (1) and (2). Let us assume that the costs are equal to 0. Hence the price level is

determined implicitly by the output level that the firms set. The relationship between the

expected (e) output of firm 2, y2e, and the output of firm 1, y1, is given by the reaction

function y1 = f1(y2e). Similarly, the output for firm 2, assuming expected output of firm 1,

is given by the reaction function y2 = f2(y1e).

In Cournot equilibrium, total output in the market, Y(y1*, y2

*) is such that

y1* = f1(y2

*)

y2* = f2(y1

*)

Where * denotes optimal profit maximizing output. This is a stable equilibrium, because

firms 1 and 2 are producing their optimal output levels: firm 1 produces the output that

firm 2 expects it to produce. Then once Y(y1*, y2

*) has been established, the price is, quite

simply, read from the market demand curve at that output level, or (y1*, y2

*) can be

substituted into the demand function. Hence the market price is determined by total

quantity supplied versus market demand. Expanding the model beyond the duopoly

assumption, when there are enough firms in the market, a firm’s output decision would

eventually have no effect on the market price. The market price therefore becomes equal

to marginal cost, as in a perfectly competitive market. Under Cournot, the price level is

influenced by the assumed output level of the other firms in the market affecting the

choice of output for one firm in the market.

Bertrand Model

Bertrand (1883) criticized Cournot’s approach of quantity setting, and proposed a

different model, such that firms set prices instead. Hence the price level in an oligopoly

can be set explicitly, and the quantity is then determined by market demand. The other

assumptions are the same as in the Cournot model. A similar principle of finding the

optimal price can be used, expressing y in terms of p (price). Market price P(p1*, p2

*)

would be obtained by firms undercutting each other until price (P) = marginal cost (MC).

This is because if firm 1 charges p1 > marginal cost, then firm 2 can always undercut this

price with p2< p1. This is known as competitive bidding. However firm 2 will stop

undercutting at the price level of P=MC because if P<MC then the firm would be losing

revenue on the extra output produced. Therefore the price level is theoretically likely to

be at P=MC, which is also the perfectly competitive output level, even with two firms in

the market. This implies that the competitive bidding process would lead to a lower price

and higher output in a Bertrand oligopoly than in a collusion of firms acting as a

monopoly. Thus under Bertrand, the price level is determined by the assumed price

decision of the other firm affecting one firm’s price decision.

Data collected from market survey

For the purpose of collection of sales data market is being segmented and sales data of

West Delhi is being collected from different Maruti showrooms.

Forecasting of potential demand

Technique used

Sales force estimates: Under this method different sales personals are being interviewed

to know the potential demand for the product in future because they know the trends in

which month demand of the product will be more or less. These estimates are being given

on the basis of the past information. They know the off seasons and peek periods. As

talking about the present state the demand for Maruti Suzuki SX4 would be more because

of Navrataras and the year end discounts.

Factors Average Demand(monthly per dealer)

During regular period 43-57

During peak period(discounts) 54-65

During off seasons 32-40

Reasons for opting sales force estimate method

1. Sales force is in the best place to tell the potential demand for the product because

they know the past trends of the sales.

2. They also are in direct contact with the customers thus knowing there taste and

preferences helping them to judge the potential demand.

3. Data generated by them are mostly accurate i.e the figures forecasted by them are

very close to the actual sales.

4. Convenient to interpret and analyze the data when compared with the other

forecasting tools namely econometric model, regression analysis.

5. Method use is also less time consuming when only few personals are interviewed

as compared to Delphi method or expert opinion method.

6. Less chances of error because no calculations are involved.

7. Best method to generate sales data for short period.

Financial analysis

Financial analysis is the process of identifying the financial strength and weakness of

the firm by properly establishing relationship between the items of the items of the

balance sheet and profit and loss account. Management of the firm, or the parties outside

the firm, viz. owners, investors, and others, can undertake financial analysis. The nature

of analysis will differ depending on the purpose of the analyst.

Trade creditors are interested in the firm’s ability to meet their claims over a very

short period of time their analysis will, therefore, confines to the firms liquidity

position. Suppliers of long term debt, on the other hand, are concerned with the

firm’s long term solvency and survival. They analyze the firm s profitability over

time, it s ability to generate cash to be able to repay interest and principal and the

relationship between various sources of funds. Long-term creditors do analyze the

historical financial statements, but the place more emphasis on the firm s projected

financial statements to make analysis about its future solvency and profitability.

Investors, who have invested their money in the firm s shares, are most concerned

about the earnings. They restore more confidence in those firms that show steady

growth in earnings. As such they concentrate on the analysis of the firm’s financial

structure to the extent it influences

the firm’s earnings ability and risk.

Management of the firm would be interested in every aspect of the financial

analysis. It is their overall responsibility to see that the resources of the firm are

used most effectively and efficiently, and the firm s financial condition is sound.

Ratio analysis

Ratio analysis is a powerful tool of financial analysis. A ratio is defined as the “indicated

quotient of two mathematical expressions” and as” the relationship between two or more

things.” in financial analysis, a ratio is used as a benchmark for evaluating the financial

position and performance of a firm. The absolute accounting figures reported in the

financial statements do not provide a meaningful understanding of the performance to

some other relevant information. For example, net profits may look impressive, but the

firm’s performance can be said to be good or bad only when the net profit figure is

related to the firm’s investment. The relationship between the two accounting figures,

expressed mathematically, is known as financial ratio. Ratio helps to summarize the large

quantities of financial performance.

Uses of ratio analysis:

We can determine the ability of the firm to meet its current obligations

We determine the overall operating efficiency and performances of the firm

Useless in analysis of financial statements

Useless in locating the week spots of the business

Useless in comparison of performance

The extent to which the firm has used its long –term solvency by borrowing

The efficiency with which the firm is utilizing its assets in generating sales

Useful in simplifying accounting figures

Useful In forecasting purpose

Weakness in financial structure on account of incorrect policies in the

present are revealed through accounting ratios

The comparisons can be made on the basis of ratios

Limitations of accounting ratios:

Ratios may be worked out for insignificant and unrelated figures.

Price level changes affect ratio analysis.

Difficult to forecast future on the basis of the past facts.

Give false result if the ratios are based on incorrect accounting.

Ignore qualitative policies.

No single standard ratio for comparison.

Limited utility if based on single set of figures.

Financial ratios provide the basic for answering some important questions concerning

financial (well being) of the firm.

How liquid is the firm? Liquidity refers to the firms’ ability to meet maturing

obligating and to convert assets into cash. This factor is very important to the firms’

creditors.

Is management generating sufficient profits from the firm’s assets? Primary purpose

for purchasing an asset is to produce profits, the analysts often seek an indication of the

adequacy of the profits being realized if the level of profits appears insufficient in relation

to the investment, and an investigation into the reasons for the inferior returns is in order.

How does the firms’ management finance its investment? These decisions have a

direct impact upon the returns provided to the common stockholders.

Are the stockholders receiving sufficient return on their investment? The objective

of financial manager is to maximize the value of the firm’s common stock, and level of

returns being received by the inventors relative to their investment is a key factor in

determining the value.

STANDARDS OF COMPARISON

The ratio analysis involves comparison for a useful interpretation of the financial

statements. Standards of comparison may consist of:

PAST RATIOS: i.e. ratios calculated from the past financial statements of the

same firm:

PROJECTED RATIOS: i.e. ratios developed using the projected, or pro forma,

financial statements of the same firm;

COMPETITORS’ RATIO: i.e. ratios of some selected firms, especially most

progressive and successful competitor, at the same point in time, and

INDUSTRY RATIOS: i.e. ratios of the industries to which the firms belongs

Classification of Ratios

Liquidity ratios

1. Current ratio

2. Quick ratio

Leverage ratios

1. Debt equity ratio

2. Total debt ratio

Activity ratios

1. Inventory turnover ratio

2. Fixed asset turnover ratio

3. Capital turnover ratio

Profitability ratios

1. Gross profit ratio.

2. Net profit to fixed asset ratio

3. Return on investment.

LIQUIDITY RATIO

Current Ratio:-

The current ratio is the measure of the firm’s short term solvency. It

indicates the availability of current assets in rupees for every one rupee of current

liability. It judges whether current assets are sufficient to meet the current liabilities. The

company must be able to meet its current obligations out of the current assets. It should

not depend upon its long term sources to pay its short term liabilities. The ratio is

calculated on the basis of the following formula. Ideal Current ratio is 2:1

Current Ratio = Current Assets

Current liabilities

Current Assets = cash, bills receivable, marketable securities etc.

Current liabilities =Loans, short term debts, creditors, accrued expenses,

bills payable etc.

Analysis

2007 2006 2005

Maruti 1.42 1.77 1.68

Tata Motors 1.25 1.27 1.21

From the following table we can analysis that the Maruti can easily cope up with the

current liability compared with the Tata Motors. There for the liquidity of Maruti is much

better then Tata Motors.

Quick Ratio: -

It is often called as acid test ratio, establishes relation ship between quick assets and

current liability. An asset is liquid if it’s converted into cash immediately or

reasonably soon without loss of value. Inventories are considered to be less liquid as

they take some time for realizing into cash so there value has a tendency to fluctuate.

A quick ratio of 1:1 is ideal one.

Quick Ratio = Quick Assets – (Stock + Prepaid expense)

Current Liabilities

Analysis:

2007 2006 2005

Maruti 1.13 1.31 1.25

Tata Motors 0.86 1.01 1.06

From the following table we can easily conclude Maruti can easily meet with the current

obligation of the creditors then Tata Motors. Tata Motors must reduce the current liability

as it is reducing below the ideal value.

LEVERAGE RATIOS

To judge the long term financial position of the firm these ratios are

calculated. They indicate the mix of funds provided by owners and lenders. This is

also known as solvency ratio. “Solvency” means the ability of the business to repay

its outside liabilities. These liabilities may be categorized as short term liabilities and

long term liabilities. Here, the term solvency ratios have been used to mean long term

financial position of the business. The company must have sufficient long term funds

to meet its long term liabilities. The Solvency of the business can be measured with

the following ratios.

Debt Equity Ratio :-

This ratio is calculated to judge the long term financial policy of the

business. The ratio establishes relationship between long term loans and

shareholder’s fund. Higher debt equity ratio shows lesser margin for long

term lenders. It also shows the cushion available to creditors.

Debt Equity ratio = Total Debt__

Net worth

Total Debt = Long term loans

Net worth= Equity share capital + Preference share

capital + reserve and surplus

Or

Net worth =Total Asset - Total Debt

Analysis

2007 2006 2005

Maruti 0.08 0.01 0.06

Tata Motor 0.37 0.41 0.59

The safety margin for the long term creditors and investors are more in case

of Maruti as compare to Tata Motors. Therefore creditor will believe in

Maruti more the Tata Motors.

Total Debt Ratio :-

This ratio shows the relationship between external and internal

equity. External equity means both long term and short term outsider’s

funds. Internal equity means both total debt and shareholder’s fund i.e.

capital employed.

Total Debt Ratio = Total debt____

Capital Employed

Capital employed= net fixed assets + net current assets

NFA + CA= NW +TD + CL

NFA + CA – CL = NW + TD

NFA + NCA = NW + TD

NA=CE ( Capital Employed)

2007 2006 2005

Maruti 0.09 0.01 0.07

Tata Motors 0.59 0.53 0.61

Analysis:-

The lesser the Total Debt ratio lesser the company has taken the debts from outside.

Therefore Maruti have come debts then Tata Motors as we can clearly see from the

following table, so Investors have more reliability in Maruti then Tata Motors.

ACTIVITY RATIO:-

Activity ratios are employed to evaluate the efficiency with which the firm manages and

utilizes its assets. These ratios are also called as turn over ratio as they indicate the speed

with which assets are being converted or turned over into sales.

Inventory turn over ratio:-

Indicates the efficiency of the firm in producing and selling product. It is

calculated by dividing the cost of good sold by average inventory. The manufacturing

firms inventory consist of two more component

1) Raw material,

2) Work in progress.

This may be calculated further.

Inventory Turnover Ratio = Cost of goods sold_______

Average inventory

Analysis

2007 2006 2005

Maruti 28.76 18.78 22.97

Tata Motor 10.6 9.95 10.7

The greater the inventory turnover ratio better is the company in handling the

inventory. Therefore we can conclude from the table that Maruti converts its

inventory into sale more frequently in respect to Tata Motors. Therefore Maruti is

good in term of handling its inventory.

Fixed Assets Turnover Ratio :-

Fixed assets are used in the business for producing goods to be sold.

Therefore, a firm should manage its assets efficiently to maximize sales. The

effective utilization of fixed assets will result in increased production and reduced

cost. It also ensures whether investment in the assets have been judicious or not.

Higher ratio indicates better performance. The calculation of Fixed Assets

Turnover Ratio is as follows:-

Fixed Assets Turnover Ratio = Sales_______

Net fixed Assets

Analysis

2007 2006 2005

Maruti 2.71 4.11 3.88

Tata Motor 6.89 5.65 5.46

The greater the ratio the better the company in profit making. From this table we can

conclude that the for Re1 of fixed Assets investment Tata Motor make a sales of Rs

6.89. In year 2007 as compared to the Rs 2.71. In case of Maruti, therefore Tata

Motor is better company in term of sales.

Capital Turnover Ratio :-

This ratio ensures whether the capital employed has been effectively used

or not. It shows how many times capital is turned over into sales. It reflects the

efficiency in the utilization of capital. Higher capital turnover ratio is always in

the interest of the enterprise. Excessive capital turnover ratio proves over trading

which is not good. The calculation for capital turnover ratio is:-

Capital Turnover Ratio = Net sales__

Capital employed

Analysis:

2007 2006 2005

Maruti 2.29 2.67 2.84

Tata Motor 4.45 3.55 3.67

This ratio shows the net sales made from 1 Rs. of Capital employed. Therefore we

can easily conclude from the table that Tata Motors make better sales as

compared to Maruti over the 3 years.

PROFITABILTY RATIOS:-

Profitability ratios are calculated to measure the operating efficiency of the

company. Profit is the difference between revenue and expenses over a period of time.

Beside management of company, creditors and owners are also interested in profitability

of the firm. Creditors want to get interest and repayment of principle regularly. There are

2 major type of profitability ratio.

Profitability in relation to sales

Profitability in relation to investment

Gross Profit Ratio :-

Gross profit is the difference between sales and manufacturing cost of

goods sold. It shows the relationship between the gross profit and sales. This ratio

shows the margin of profit on sales.

Gross profit ratio = Sales - cost of good sold

Sales

= Gross profit

Sales

Analysis:

2007 2006 2005

Maruti 13.05 12.95 10.08

Tata Motor 9.60 10.02 11.35

The greater the Gross profit ratio the better the company. We can easily see that the gross

profit ratio of Maruti is better then the Tata Motors. But from the following table we can

also conclude that Tata Motor is degrading over the year while the Maruti is upgrading

over the years.

Net Profit Ratio:-

It indicates the relationship of net profit to sales and also shows, whether

fixed assets are properly used or not. It will be in the favors of the business, if this ratio is

higher.

Net Profit Margin = Profit after tax

Sales

Analysis:

2007 2006 2005

Maruti 10.29 9.53 7.57

Tata Motor 7.20 7.63 7.21

The better the Net profit ratio better the performance of company. So Maruti are

generating more profit from the sales of goods as compared to the Tata Motors. We

can also see that the Net Profit Margin of Maruti is increasing over the years as

compared to the Tata Motors.

Return on Investment:-

It indicates the relationship of net profit with capital employed in the

business. Return on investment ratio measures, the operational efficiency and borrowing

policy of the enterprise. It also shows how effectively the capital employed in the

business is used.

Total assets = net fixed assets + current assets

Return on Investment = EBIT

Total assets

Analysis:

2007 2006 2005

Maruti 30.74 33.47 28.12

Tata Motor 14.55 12.89 15.66

Return on Investment shows the profitably of the company and the operational

efficiency of the capital employment by the company. From the table we can see that

Maruti have a better operating efficiency then the Tata Motor.

Cash Flow:

Cash flow is a term that refers to the amount of cash being received and spent by a

business during a defined period of time, sometimes tied to a specific project.

Measurement of cash flow can be used

To evaluate the state or performance of a business or project.

To determine problems with liquidity. Being profitable does not necessarily mean

being liquid. A company can fail because of a shortage of cash, even while

profitable.

To generate project rate of returns. The time of cash flows into and out of projects

are used as inputs to financial models such as internal rate of return, and net

present value.

To examine income or growth of a business when it is believed that accrual

accounting concepts do not represent economic realities. Alternately, cash flow

can be used to 'validate' the net income generated by accrual accounting

Cash flow analysis of Maruti and Tata motors

Considering the figures of 2007 we can conclude that both the company’s are

making their profit from their actual business. I.e from the operating activity

If we compare cash flow statement of both the company, we see that tata

motors are making more profits on an account of operating activity.

Pertaining to investing activity we can conclude that tata motors are investing

more in their investing activities or going for more fixed assets purchase may

be due to business expansion or market change. Requirements are increasing

day by day to cope up with the increasing competition.

Related to financing activity we came to conclude that maruti is seeking loans

from lenders or issuing equity share capital.

Cash and its equivalent like market securities of tata motors are decreasing as

compared to Maruti as they may be investing more for proceedings.

Annexure

  Mar ' 07 Mar ' 06 Mar ' 05 Mar ' 04 Mar ' 03

Sources of funds

Owner's fund

Equity share capital 144.50 144.50 144.50 144.50 144.50

Share application money - - - - -

Preference share capital - - - - -

Reserves & surplus 6,709.40 5,308.10 4,234.30 3,446.70 2,953.50

Loan funds

Secured loans 63.50 71.70 307.60 311.90 300.00

Unsecured loans 567.30 - - - 156.00

Total 7,484.70 5,524.30 4,686.40 3,903.10 3,554.00

Uses of funds

Fixed assets

Gross block 6,146.80 4,954.60 5,053.10 4,566.70 4,513.80

Less : revaluation reserve - - - - -

Less : accumulated depreciation 3,487.10 3,259.40 3,179.40 2,735.90 2,258.10

Net block 2,659.70 1,695.20 1,873.70 1,830.80 2,255.70

Capital work-in-progress 238.90 92.00 42.10 74.90 9.30

Investments 3,409.20 2,051.20 1,516.60 1,677.30 103.20

Net current assets

Current assets, loans & advances 3,956.00 3,870.70 3,097.40 2,144.40 3,014.50

Less : current liabilities & provisions 2,779.10 2,184.80 1,843.40 1,840.60 1,917.40

Total net current assets 1,176.90 1,685.90 1,254.00 303.80 1,097.10

Miscellaneous expenses not written - - - 16.30 88.70

Total 7,484.70 5,524.30 4,686.40 3,903.10 3,554.00

Notes:

Book value of unquoted investments 3,398.10 2,040.10 1,505.50 1,666.20 88.70

Market value of quoted investments 270.40 289.80 200.10 150.90 50.80

Contingent liabilities 2,094.60 1,289.70 893.60 1,119.80 1,276.40

Number of equity shares outstanding

(Lacs) 2889.10 2889.10 2889.10 2889.10 2889.10

Balance sheet of Maruti Suzuki (Rs crore)

Ratios:

2007 2006 2005

Current Ratio 1.42 1.77 1.68

Quick Ratio 1.83 1.31 1.25

Debt Equity Ratio 0.08 0.02 0.06

Total Debt Ratio 0.09 0.01 0.07

Inventory turnover ratio 28.76 18.78 22.97

Fixed asset Turn over Ratio 2.71 4.11 3.88

Capital Turnover Ratio 2.29 2.67 2.84

Gross profit turnover ratio 13.05 12.95 10.08

Net profit to fixed asset ratio 10.29 9.53 7.57

Return on investment 30.74 33.47 28.22

Income Statement of tata motors

As on( Months ) 31-Mar-07(12) 31-Mar-06(12) 31-Mar-05(12)

Profit / Loss A/C Rs mn Rs mn Rs mn

Net Sales 265739.90 200374.90 171539.80

Operating Income (OI) 267822.60 204880.70 172658.20

OPBDIT 25523.60 20793.20 19470.30

OPBDT 23697.70 18529.70 17928.80

OPBT 17834.80 13320.30 13427.20

Non-Operating Income 7917.00 7217.80 3097.30

Extraordinary/Prior

Period-13.50 -1421.50 -511.30

Tax 6603.70 3827.80 3643.70

Profit after tax(PAT) 19134.60 15288.80 12369.50

Cash Profit 24997.50 20498.20 16871.10

Dividend-Equity 5780.70 4979.40 4521.90

Balance Sheet of tata motors

As on 31-Mar-07 31-Mar-06 31-Mar-05

Assets Rs mn Rs mn Rs mn

Gross Block 87153.40 79106.50 65774.40

Net Block 38553.10 35436.50 31576.70

Capital WIP 25133.20 9511.90 5388.40

Investments 23585.10 18377.80 13830.00

Inventory 25009.50 20122.40 16013.60

Receivables 7821.80 7157.80 8113.20

Other Current Assets 71537.80 72614.10 63652.60

Balance Sheet Total(BT) 191640.50 163220.50 138574.50

Liabilities Rs mn Rs mn Rs mn

Equity Share Capital 3854.10 3828.70 3617.90

Reserves 64483.00 51136.90 37314.40

Total Debt 40091.40 29368.40 24954.20

Creditors and Acceptances 57135.10 55358.70 50770.10

Other current liab/prov. 26076.90 23527.80 21917.90

Balance Sheet Total(BT) 191640.50 163220.50 138574.50

Ratio:

2007 2006 2005

Current ratio 1.25 1.27 1.21

Quick ratio 0.86 1.01 1.06

Debt equity ratio 0.37 0.41 0.59

Total debt equity ratio 0.59 0.53 0.61

Inventory turnover ratio 10.6 9.95 10.7

Fixed asset turnover ratio 6.89 5.65 5.46

Capital turnover ratio 4.45 3.55 3.67

Gross profit ratio 9.60 10.02 11.35

Net profit ratio to fixed asset 7.20 7.63 7.21

Return on investment 14.55 12.89 15.66

TATA MOTORS LTD.

(Rs in Cr.)

CASHFLOW STATEMENT

 Mar

' 07 

Mar

' 05 

Mar

' 04 

Mar

' 03 

Ma

r '

02 

Profit Before

Tax 

 1,9

13.4

6

 1,2

36.

95

 810

.34

 300

.11

 -

53.

73

Net Cash Flow-

Operating

Activity 

 2,2

10.1

3

 1,2

49.

82

 2,7

17.5

3

 1,3

11.4

0

 85

7.8

7

Net Cash Used

In Investing

Activity 

 -

2,80

5.10

 -

956

.57

 -

2,04

3.19

 -

183.

92

 11

3.0

9

Net Cash Used

in Fin. Activity 

 303

.58

 94

0.6

7

 -

149.

20

 -

1,20

8.75

 -

759

.78

Net Inc/Dec In

Cash And

Equivalent 

 -

291.

39

 1,2

33.

92

 525

.14

 -

81.2

7

 21

1.1

8

Cash And

Equivalent

Begin of Year 

 1,1

18.1

5

 77

1.1

2

 245

.35

 326

.62

 11

5.4

4

Cash And

Equivalent End

Of Year 

 826

.76

 2,0

05.

04

 770

.49

 245

.35

 32

6.6

2

MARUTI SUZUKI INDIA LTD.CASHFLOW STATEMENT

(Rs in Cr.)

  Mar ' 07  Mar ' 05  Mar ' 04  Mar ' 03  Mar ' 02 

Profit Before Tax   2,279.80  1,304.90  769.80  282.10  118.30

Net Cash Flow-Operating Activity   2,028.00  1,073.70  1,035.90  770.50  653.90

Net Cash Used In Investing Activity   -2,436.80  -192.70  -1,551.10  37.00  -128.10

Net Cash Used in Fin. Activity   430.00  -91.80  -234.00  110.00  -541.50

Net Inc/Dec In Cash And Equivalent   21.20  789.20  -749.20  917.50  -15.70

Cash And Equivalent Begin of Year   1,401.60  240.20  989.40  71.90  87.60

Cash And Equivalent End Of Year   1,422.80  1,029.40  240.20  989.40  71.90