M A RUT I SUZUKI IND IA LI M I TED: SUST A I...

Question

M							A							RUT							I				SUZUKI								IND				IA								LI				M				I				TED:				SUST				A				I				N				I				NG				PROF				I				T				A				B				I				L				I				TY																															A		ft		e		r						India			opened up										i			ts						economy			in						the			ear			ly1990s,						the						Indian			au			tomobile			industry			w			i			tnessed			intensecompeti			t			ion.						Mar			u			ti			Suzuki						India			Li			m			ited						(Ma			rut			i)						had			been			a			dom			inant			player			in				the						Indian			automobile			indus			try since						it			began			ope			rat			ions			in			1981.			Ma			r			u			ti						w			as			so			popul			ar						t			hat						in						India			people						had						longused						t			he			word						“Marut			i”						as			a			synonym			for							“ca			r.”			Ma			ruti			had			exper			ienced			a			dr			eam			run										f			or						three			decades,ach			iev			ing			the										lar			gest						mar			ket			share						in						the			passenger			car						i			ndus			t			ry						in						India.						But						for						the						f			i			r			st						t			i			me			aft			er			28						years						ofconsistent						g			rowth,			Ma			ruti			exper			ienced			a				f			a			ll						in			sa			les						volume						in						2012						(see			Exhi			b			it			1			).			Even						in			2014,af			t			er			t			wo						years,			it			had			not						yet				r			ecovered.						R.C.						Bhar			gava,						t			he			cha			ir			man			of			Ma			r			u			ti,						w			as			conce			rned						w			ith						how				to			turn			t			h			ings			around.						He						knew						that			Ma			ruti			had						l			i			t			t			le			con			tr			ol			over			pr			i			c			ing,						g			i			ven						the				fi			e			rce			compet			i			ti			on						in			t			hesector.						Desp			i			te						the			pr			i			ce			of			cars						remai			n			ing stagnant			over						the						last			decade,			Ma			ruti						and						its			compet			it			o			rs						were exper			iencing			dec			l			ining			sa			l			es.											2																Pr			ices						of						fuel			had			adver			sely			af			fected demand.						Input			costs				f			or						manufac			tur			ing			were						increas			ing						year			af			t			er						year.			Wi			th						such			a			dismal			out			look						for						the						automobi			le						indus			try			and						w			ith						poorpri			ce						maneuverabi			l			i			t			y,			how						long			could			Ma			ruti			sust			a			in			prof			i			ts?			The							cha			ir			man						knew			he			had						to			dec			rease				t			hecosts						of						manufac			tur			ing			and			he						w			as			consider			ing			bui			l			d			ing			a						s			tate-of			-			the-art			pl			ant						in						G			u			jarat			.											3											Wou			ld						this			reduce			costs			enough			to			he			lp			Maruti			become						more			pr			o			f			itabl			e?															INDI				AN								P				A				SS				ENG				ER								C				AR								M				ARK				ET																T		he						Indian			passenger			car						mar			ket						was						t			he						fastest						g			r			o			w			ing						in						A			s			ia,						d			ri			ven			by						I			ndia’s						lar			ge						populat			ion			of						1.28			bi			l			l			ion			and			a						low						penet			rat			ion						of						fewer						than			12			cars			per			1,000			peop			le						(see			Exhi			b			it						2			).						P			ri			or						to						t			he			1990s,										t			he						Indian			automobi			le			sec			tor						w			as						in			poor						shape			compa			red						to						the			automobile			sec			tors						in						o			ther						count			r			ies,						l			a			r			gely			because			of						demand			-side						cons			tr			a			i			n			ts			such			as						the						low			pu			rchas			i			ng			power						of						the			average						I		ndian			consumer.						B			e			fore			Indi			a			’s						econom			ic			li			ber			a			li			za			t			ion,			the						m			a			j			o			r			i			tyof						India’s			popu			l			a			tion cou			ld						not aff			o			rd			to			buya			ca			r,			andcar							pene			t			rat			ion						w			as						l			ess			than			thr			ee			per			1,000 peop			le.						A			ft			er						l			ibe			r			a			li			zat			ion,						w			i			th			ri			s			ing						income						levels			of						m			iddl			e			-class						fam			ili			es,						the			de			mand						for			passenger			ca			rs						went			up			stead			ily			over						the next							20						yea			rs.						However,						car						pene			tr			a			t			ion						w			as						s			t			i			ll						ve			ry			low							compar			ed			to			in						B			raz			il,						R			ussia,						C			h			ina and developed			count			ri			es						(see			Exhi			b			it			2).			From a			supply-side			perspec			ti			ve,						the			au			tomobi			le						indus			try			had						g			reat			ly benef			i			ted						f			rom			liberal			i			zat			ion,			as						i			n			t			e			rna			tional			au			t			o			mobile						manufact			u			r			e			rs						took			advantage			of						India’saff			o			rdable						yet						h			i			ghly						tr			a			i			ned			eng			ineers,						est			abl			ish			ing						manufact			u			ri			ng			ope			r			a			ti			ons						throughout						the			count			r			y.			Due										to						India’s			huge			pool						of						t			a			lent			and						r			ising			income						levels,						India’s						passenger						car						mar			ket			had						g			rown						in			ter			ms			of						p			roduct			ion			and sa			les			and			was			expec			ted						to			g			r			ow						fur			ther						in			com			ing				years.											4																			Passenger						vehicles						in						India			could						be			br			oadly			di			v			ided						into						three			seg			ments			—			passenger						cars,			ut			i			l			ity			vehicl			es			and						multi			-purpose						vehicles			—						w			ith						passenger			cars			con			t			r			ibu			ting around 80			per						cent						of						t			o			t			al			sa			les			volumes.						As			of			2014,						this						segment						was			expec			ted			to										g			row			at			a			compound			annual						rate						of			15			percent										for				t			he			next			15						to			20						years.						Apart						from			domestic						g			row			th,						automobile			expor			ts						from						India						were			pr			edi			c			ted						to						g			rowat			12			per			cen			t.						It						may			be			noted						here						tha			t,						in			a						low						per			cap			i			ta						i			ncome			country						l			i			ke						India,						t			wo-			wheelers			(			motorcycles			and scooter			s)			consti			t			u			ted a						m			a			jor						mode			of				t			ranspo			r			tat			ion			f			or						the						lower						m			iddle						c			lass,						who			would			eventua			lly			g			raduate			to						the			small			-car			seg			ment.						In						most			ci			t			ies						and						towns,						due						to						the			poor			quali			ty of			roads			and			excess			i			ve						t			r			a			f			f			ic			congest			ion,						motorcycles						were			the										f			i			rst			cho			ice				f			or			daily			com			mutes.						However,			acar						was			consi			dered			a			pr			i			zedpossess			ion						f			or			a						m			iddle-class						Indian						fam			il			y,			even						though						it						was			not			used			on			a dai			ly			basi			s.						W			ith						r			ising						i			ncome						levels,						this			he			ld						g			reat			prom			ise						for			car						manufac			turers,						as						fewer						than						12 people			per			1,000			owned			a						car						in			India,			r			e			f			lect			ing			huge						mar			ket			potent			i			a			l.															M							A							JOR				CO				M				PE				TIT				ORS								OF								M				ARUTI														T		he			re						were						many			players						in						the			passenger			car			seg			m			ent						in						India.			Some			of						these			players						were			domest			i			c, such			as						Mar			u			ti,				T			a			ta			and			Mahindra.						O			the			rs			such						as						H			yundai,						Honda			and			Toyota						were						f			romother						Asi			ancount			r			ies.			T			he						t			wo companies			w			i			th						t			he						lar			gest						market						share						in			India						were Ma			rut			i,						at			49per			cen			t,						and						H			yundai,						at			21per										cent				(			see			Exh			i			b			it 3						for				t			rends			in			the			mar			ket			sha			re of			Ma			r			u			ti			and			i			ts						competi			tor			s).			A			lthough						t			here						w			e			re						many			players						in						t			he						luxury			seg			ment			of						the						mar			ket			such						as			Mercedes-			Benz,						BMW and										Aud			i,						there						w			e			re						few			buyers						who			had						the						i			nco			me						to			suppo			rt			such			pu			rchases.			The			re						w			e			re			ot			hercompetit			o			rs						for						Mar			u			ti			such			as			Ford,						GM,						N			i			ssan,						Renaul			t,						Š			koda			and						Vol			ks			wagen						that			compet			ed						in			m			ini-and						m			id-segment			cars.				These			companies			had						taken			considerable						mar			ket			sha			re						from Ma			ruti						in						recent			years.															M							A							RUTI:								THE				CO				M				P				ANY										Estab			l			ished						in			1981,			Ma			r			u			ti			en			joyed						the						lar			gest						market			share						in						the						Indian			passenger			car			seg			ment.						In			2014,Ma			rut			i,			w			ith						t			wo pr			oduct			ion			f			aci			l			i			t			ies			at						Gur			gaonand Manesar						(both						in			the						National						Cap			i			tal						Reg			ion of						Del			h			i),			had a						p			roduct			ion			capac			ity			of						more				t			han1.4						m			illion un			i			ts			per						year			.											5																T		he							produc			t			ion			faci			l			it			ies			had										m		ore						than 12, 000 empl			oyees											6																and produced			more			than16 automobile			models,											7																each						w			ith			multi			p			le						variants.											8																Examples						of						Marut			i			’s			product			of			f			e			rings						inc			luded			small						cars						l			i			ke						t			he						Maruti						A			lto,						Wagon			R			and			A			-Star.			Small						cars						made			up			41.2						per						cen			t											9																of			Marut			i’s						t			o			t			al			sa			les			uni			ts.						In						the			compact			car						segment, Mar			u			ti			of			fered			ca			rs						such						as						the			Sw			i			f			t,			Est			i			lo,						Ri			tz and						Cel			e			ri			o.			This seg			ment						made			up			24			per			cent						of			Mar			u			t			i			’s						t			o			t			al						sal			es.						In						the						m			i			d			-si			ze			segment,						t			he			company			of			fered						the						S			X4			and						D			z			ire,						which						cont			ri			but			ed						19.1						per			cent						of			sales.			The			sport						u			t			i			l			i			ty						vehi			c			le			seg			ment						made			up			j			ust			5.8			per						cent			of						sales			and			con			t			r			ibuted			less			to Ma			rut			i			’s						p			rof			i			ts						t			han			small			and						m			id-segment			cars.						F			ina			ll			y,						in						t			he						vans						segment,						the company			was			known						for						t			he						O			mni			and			Eeco,						w			h			ich			con			t			r			ibu			ted			9.6			per						cent						to						its			over			a			ll						sa			les.			The						remai			n			ing			sa			les came						fromother						models			of			Maruti			ca			rs.						F			rom			the						Ma			ruti			800				in						1983			up				to				the						launch						of						the						C			e			l			e			rio				in			Februa			ry 2014,										Mar			u			ti						had			rol			led			out						model						a			ft			er						model			and			exceeded			cus			tomer			expec			t			a			tions						in			t			e			r			ms			ofqual			ity			and			val			ue				f			or						money.												Mar			u			ti				focused			on						t			h			ree						key strateg			i			es						to						gener			a			te			sa			les.			Fi			rst			and			foremost,						i			ts						p			ri			c			ingstr			a			tegy			was										very competi			t			i			ve.			For			example,						in						t			he			small						car			seg			ment,						t			he						Mar			u			ti						Al			to						w			as						p			r			iced			10–20						per			cent				low			er				than competing			models			suchas				the						H			yundai						Sant			ro, Tata						Indica			and						C			hev			rol			et			Spa			rk			(see										Exhibi			t4).						Second, Mar			u			ti			spent				a											g						reat						deal							on																	resea									rch and develop									ment																			to																					c											rea											te																							more												fue												l												-ef												f												i												c												ient												eng													ines.													T													h													is decreased																										the																										cost																										of													owning													a													car																										for													a													consumer;																										I													ndian													customers																										were																										very													sensi													ti													v													e																																																			10																																																																		r												egarding																										the													fuel																											ef													f													iciency													of																										vehicl													es,													since																										fuel													cos													ts																										were													hi													gh																										r													e													lat													i													ve																										to													average																										i													nco													me																										levels.																										Thi													rd,													Marutioff													e													red																										r													e													li													able													af													t													er-sales													ser													v													ice,													backed													by																										its													ext													ensi													ve													se													r													v													ice													ne													t													wor													ks.																																																			11																																																																		T												h												ere																										w													e													re																										more																										than													15 competit													o													rs																										in																										the																										mar													ket													and																										it																										was													never																										easy													for													a													company																										to																										r													e													tain																										more																										than																										40													per													cent																										of																										t													he																										mar													ket													share.																										But													Ma													ruti													had													done																										it													cons													i													s													ten													tly																										over																										three																										decades.													Ma													ruti													cars													en													joyed													a													unique posi													ti													on																										in																										t													he																										Indian													consumer’s																										m													ind.													Maruti													sco													r													ed													hi													gher																										than													i													ts													competi													t													o													rs																										in																										ter													ms													of													pr													ice,																										f													uelef													f													i													c													iency and													r													e													li													abi													l													i													t													y,													and																										i													ts													sa													l													es																										were													boos													tedby													the													prom													ise																										of																										e													f													f													icient													af													ter-sales													se													r													v													ice.The													uncer													t													a													inty													of																										get													ting													s													tuckon																										Indian													roads													due													to																										machine													ry													f													a													il													u													re													was ef													fec													ti													velyexp													loi													tedby Ma													rut													i.																										As													Mar													u													ti													had													a													ne													t													work of													3,053													se													r													v													ice													stat													ions													in													1,449																										Indian													cit													ies,																										i													ts																										p													rom													ise													of																										r													e													li													abi													l													i													ty													wasunmatched													by any of																																								its													co													mpetitors.																										In																										ter													ms													of																										fuel													ef													f													i													c													iency,													Ma													ruti													ca													rs													pr													ov													ided													an													average													of																										three													k													ilometres																										more													per														l													i													t													re													of													pet													rol													/diesel													compared													to																																								i													ts													compet													i													t													o													rs.													The														r													esale																										value																										of																										Mar													u													ti													cars																										w													asalso													f													ar													hi													gher														than													that													of													anyof																										its													compet													i													tors.													Ma													ruti													of													f													e													red																										i													ts													True														V													a													lue													used-car													bus													iness,																										with																										more																										than													454													T													r													ue																										V													a													l													ue													out													lets																										in													255																										Indian																										c													i													t													ies,													reassur													ing													its													customers													t													hat																										t													hey													would													at													tain																										t													he hi													ghest																										resale																										value																										from													any																											Maruti																										b													rand.													For													an																										Indian																										m													iddle-class																										fam													ily													planning														to													buy													a													new													ca													r, Mar													u													ti														was																										the																										f													i													r													st													and													most													obv													ious													cho													ice.																																																																																						CO				M				PE				TING								WITH								M				ARUTI								C				ARS																Mar			u			ti			had						i			mplemented						very						few			pr			ice						increases						in						i			ts			passenger			car			seg			ments			over						t			he						last			10–12						yea			rs.						N		onethe			l			ess,			competi			tors						had			emer			ged						in			each			of						these			seg			ments.						Out			of			Ma			r			u			t			i’s			16						car						models,						each																						m		odel			had			any			where						f			rom one						to			seven						c			lose			compet			i			t			o			rs						f			rom			H			yundai,				Tata			Mot			o			rs,						V			o			l			kswagen,			Toyota,						H			onda						or						Chev			rolet						(see			Exhi			b			it			5).						Howeve			r,			despi			te						int			ense			compet			i			t			ion,			Ma			ruti			had						r			e			t			a			ined						its						leadersh			ip			pos			i			t			ion						in			most							segments.						In						fact,						it						was			so			per			vasi			ve			a			brand			that			some			of						its						models competed			among			themselves.			For			example,			its										A			l			to						model			competed						wi			th			the Ma			ruti			800,and			the Wagon R			competed						w			ith			the						R			i			t			z.			Maruti			had						mai			n			tained			its“peop			l			e			’s						car”			i			mage			since						i			ts						incep			t			ion			by st			rateg			i			cal			ly						keeping			prices						low			and			posi			t			ioningent			ry-			level			ca			rs						f			or						f			i			r			s			t			-			ti			me			buyers.						M			i			n			i			-segment			car			s,			which						cons			t			i			tuted						more				than			80			per						cent			of			Ma			rut			i			’s				t			o			tal			sa			les,			ca			r			r			iedpr			ice				tags				that						were						at						least			20–30per						cent						low			er				t			han						those			of						the			ir						nearest			compet			i			t			o			rs.												T		he			bes			t			sel			ling			m			ini			-segment						models			of			Ma			ruti						w			e			re				the						A			lto			and				the			800.						T			he			pr			ices			of				these						cars			had			remained						s			tagnant						for			a						l			ong						ti			me.						In						fact,						in						many						instances,						the						p			r			ices						of						t			hese			cars			had			been						r			educed.For						example,						the						launchpri			ce						of						the						Al			to						LX						model						w			as						I			NR299,000											12																i		n			2002,			and						the			pr			ice						was subsequen			tly			r			educed						year						a			ft			er						year			un			t			il			2009,						when						t			he						p			r			ice						w			as						I			N			R257,000,			a				reduct			ion						of approx			i			mately			14			per						centaf			ter			seven						years.						T			he						p			ri			ce			of				the			800						model						was						I			N			R281,000				in			2002,						whi			ch			was										reduced			to						I			NR221,000										in			2010,			a			drop						of			21			per			cent.			T			he			pr			ice						of						t			he			Wagon			R						was						reduced			from			I			NR359,000						to						I			N			R338,000			during			the										same			period.			However,			Maruti						was			ab			le						to						inc			r			ease						the			pr			i			ce			mar			g			inally			for						the						compact			and						m			id			-si			ze			segment			carsover										this			pe			ri			od,						which			boosted			the						revenue			of						thecompany.												T		he			passenger			car						mar			ket						in						India			had			w			i			tnessed			i			n			t			ense						p			r			ice			compet			i			tion.						It						was						so						int			ense				t			hat			not			a sing			le						p			r			ice			change			by			any			of						the						p			layers						had						gone						w			ithout			a						react			ion						from						r			i			val						f			i			r			ms.						If			one						lookedcar			e			f			u			lly			at						a			ll						t			he						models			of						the			di			ff			e			rent						b			rands,						the						intens			ity			of						t			he						p			ri			ce						w			ar						w			as			ev			ident.			Spec			i			f			i			cal			l			y,			in						the						case			of						the			Ma			ruti						A			lto,			even			Ma			rut			i			’s						c			lose						competit			o			rs			—						H			yundai			and						T			a			ta			—			could			not						r			a			ise			the			pr			ices			of						t			heir			cars			over				the						years;				theyhad						to						reduce						the						p			ri			ces			of						the			ir						models						to						r			e			tain						mar			ket			share.For			example,						in						A			p			r			il			2004,						when						t			he						p			ri			ce			of						t			he						Maruti						A			lto						f			e			ll			by around			7						to			8			per			cen			t,						the						H			yundai Sant			ro			pr			i			ce			co			rr			espond			ing			ly						fell			by			4.6						per			cen			t.			Si			m			i			larl			y,						in			June							2009,						w			hen						t			he			Ma			ruti						Al			to						p			r			ice						fell by 8.8							per			cent,			the						H			yundai			San			tro						p			ri			ce						f			e			ll			by 7.7			per			cen			t,						whi			le						the			Tata						I			ndica						p			r			ice						f			e			ll			by9.8			percent.						T			hough			it										was			never						easy						for			car						manufac			turers						to			reduce			pr			i			ces,			they						were						left						w			ith no			cho			ice			but						tosell						the			ir						p			roduc			ts						at						reduced			or			stagnant			pr			ices.			Even						for						t			he						m			i			d			-si			ze			and			compact			segments,			Ma			ruti could						not						inc			rease			pr			i			ce						when						it						w			ish			ed						to			due						to			pr			ice			compet			i			t			ion.						Though						t			he			company			had			been			able			to						r			e			t			a			in						i			ts						l			eade			rsh			ip			posi			t			ion,			its										mar			ket			sha			re			had						fal			len			over						t			he						years						due						to						t			he						intense			pr			ice competi			t			ion.												I		n			2001,			Ma			ruti						had						t			o			t			al						revenue			of						I			NR70.21			bi			l			l			ion,						which						inc			luded						o			ther						inco			me						w			ith			net			sa			les.			The			re			was							a			st			eady				r			ise				in			Maruti			’s				revenue			even						though						sales						volumes						f			e			ll						f			rom2011				to			2014.						In			2014,						Mar			u			ti			reg			ister			ed			sa			l			es						revenue						of						I			NR445.43			bi			ll			ion,			a						r			ise			of						more						than500						per			cent						in			14						years			(see			Exh			i			b			it			6			).			Even						though			Maruti			could			not						raise						t			he			pr			ices						of						i			ts						m			ini			-segment			cars,						the						r			ise						in			sa			les						revenue						was			mainly			due				to a						r			ise						inun			it			sal			es			and			mar			g			inal						increases				in						the						p			r			ices			of						i			ts			compact			ca			rs.															INPUT				CO				S				TS																T		he						p			r			ices						of						raw						materi			a			ls						for						cars			had						r			isen			si			gni			f			i			cant			ly since			2001.						Bas			ic						metal						p			r			ices						had						i			ncr			eased shar			p			l			y,			except						for			the						p			ri			ce			of						a			lum			inum.			Steel						was			the						maj			or						raw						mater			i			al						f			or						cars,						and						t			he			pr			i			ce			of						s			t			eel			had				increased			by						at						least			thr			ee						ti			mes						(see			Exh			ibi			t7)			si			nce			2001.											13																A		part						f			romstee			l,			ot			her						inputs						f			or automobi			les			such						as			coppe			r,						lead			and						rubber						(			see			Exh			ibi			t7)			had						gone			up						in			cost			by			at						least			240			per			cen			t.												Even						the			pr			ice			of						a			lum			inum			had			exper			ienced			a						mar			g			inal						r			ise						of			7						per						cent.			The			only						raw						mater			i			al						f			or			which						t			here			had			been			no			si			gnificant			pr			ice				ri			se						was			pal			lad			ium,			but						its			usage						in			car-			mak			i			ng			was						relat			i			vely neg			li			g			ible.						A			part						f			rom			these						materi			a			ls,						the						p			ri			ces			of						o			ther						mater			ials			and						inpu			ts			such			as						e			lec			t			r			i			c			ity			and						f			uel had										gone			up			during						the			sa			me			per			iod.						T			he						r			ise						in						i			nput			prices						had			been			as						much			as			300–400			per			cen			t. Speci			f			ical			l			y, steel			and						rubber						p			r			i			ces						had			s			i			gnif			ican			tly				raised			t			he			cost						of						p			roduc			t			ion.															L							abour				Costs										T		hecost							of						l			abour						had						gone			up			si			gni			f			i			cant			lydue						to			the										r			ise			in						gener			al			pr			i			ce			l			evels						(i			n			f			lat			ion)				in						India.			Though			Mar			u			ti			depended			heav			ily			oncon			tr			act			ual						labo			u			rers				to			cut			down on						labour			costs,			it							had			to			keep			pace			w			ith						the						mar			ket						in						t			e			r			ms			of			compensat			ion						and			per			ks						in			order						to						r			e			tain			employees.						The						wage			dispar			i			ty bet			ween			Ma			rut			i			’s						regular						e			mployees			and			contrac			tual						e			mployees						in						the						past			had						l			ed						to						HR				issues			that			had			g			i			ven			Maruti						much			bad			publ			ici			t			y.						The						t			ragedi			es			of						t			he			Manesar						p			lan			t											14											had						forced			Ma			ruti						to						rev			i			s			it						t			hecompensat			ion						packages						g			i			ven						to						i			ts			employees.			This			had				resu			l			ted				in			fur			ther						r			i			s			ing			employee			costs.			T			he			employee			cost			had						been			a			mere						I			NR1.99			bill			ion						in			2001,			but			had				r			isen						to						I			NR10.69			bi			l			l			ion						in			2013–2014						(see			Exh			i			b			it			6			).						It						m			aybe						noted						that						a			long			w			ith						Mar			u			t			i			’s			cos			ts,						the						l			abour						costs			per						unit						for				its						competit			ors had			a			lso						ri			sen			acco			rding			ly			during						t			he			same						t			i			me			peri			od.															S							elling				Costs																Wi			th						t			he			au			tomobile						sector			beingso						f			iercely compet			it			i			ve,			Mar			u			ti			needed						tospend			a						l			ot			on			promot			ional act			i			v			it			ies.						The						d			i			s			t			r			ibu			tion			and			channel						costs			had						a			lso						risen						w			ith						the						r			ise						in						f			uel			pri			ces.											15											For			Mar			u			ti						to			retain			i			ts						mar			ket			sha			re,			it			had						to			engage						in						ext			ensi			ve			ad			campai			gns			on						telev			ision			and			t			h			rough			ot			h			er			promotional			avenues.			T			he			cost			of			adver			t			i			s			ing on						tel			ev			ision						had						r			i			sen						each						year,						resul			ting			in			i			ncr			eased spend			ing			on						p			romotion. The										p			romotion			and						t			e			lev			i			s			i			on			cos			ts			had						r			isen						f			rom						I			N			R6.33						b			i			l			lion						in			2001						to			I			NR64.99			bi			l			lion						in			2014						(see			Exh			ibi			t			6			).						In			per			capi			ta						ter			ms,			expenses						had						r			i			sen						from			a						mere						I			NR18,069			toa						whopping						I			NR56,266 per						car						dur			ing						the						same			per			iod.																					KE				E				PING				DO				WN				CO				S				TS																T		he			au			tomobi			le				indus			try						was						at			a			crossr			oads						where				t			he			costs						of						raw						mater			i			a			ls			and			ope			r			a			tions			cont			inued			to			increase			subs			tan			t			ial			ly						w			ithout			a			cor			respond			ing						rise						in			the			pr			ices			of						the			pr			oduc			ts			sold.			For			compani			es						in			this			sect			o			r,			it										w			as						verydi			ff			icu			lt				to						sustainpr			o			f			it				levels						t			hat						met						the						expec			t			a			ti			ons of						s			tak			eho			lders			and						t			he						mar			ket.						It			seemed						that						the			sol			u			ti			on						lay			in			the				i			mplem			ent			a			tion						of						more			ef			f			ici			ent						product			ion.						As						p			r			ices						had			remained			st			icky			for							an			extended			pe			ri			od			of						t			i			me			and			costs						kept						r			i			s			ing,						fir			ms			needed						to						i			nnovate						to						b			ringcosts			down.						Manu			fac			turers			cont			inued				to						add			new			fea			tures						to						their						p			roduc			ts			and						in						the						p			rocess						d			i			scovered			cost			-cut			t			ing						measures.								Mar			u			ti			had			been			do			ing			this			successful			ly			for						more						than						t			wo			decades.						However,						in						the			scenar			io			of						r			isingcosts,			the			company			faced			major			cha			l			lenges,as				the			re						was			no cushion			a			llow			ing			it				to pass			on			the						bur			den			to consumers.						Any			attempt						on			Mar			u			t			i			’s						part						to						raise			pr			ices						was						met						w			ith			a			pr			ice						cut			by						its						r			i			vals.						Y			et						t			he			ri			val						f			i			r			ms						were			also						fac			i			ng						the						same			chal			lenges;						in						fac			t,						the			cha			l			lenges						were						worse						f			or						them						than						f			or Mar			u			t			i.						T			he			on			ly			al			t			e			rna			t			i			ve						for						t			he						manufac			t			u			rers						was						to						keep						t			he						costs						of			produc			t			ion						down						thr			ough												i		ncreased			ef			f			ici			ency.						As						increasing			the							pr			i			ce						for						most			Mar			u			ti						models						was			out			of				the			ques			tion,						the			on			ly sol			u			ti			on						lay			in						achiev			ing			techni			cal			ef			fic			iencyand			econom			ies			of			scal			e.			The						gap						bet			ween			the			average			costand						the						p			r			ice						was						quick			ly shr			ink			ing			for			each						model.						The			r			e			fore,						to			remain						r			e			levant						in			the										mar			ket,			Ma			ruti had						to				innovate			const			antly				to			cut			down						cos			ts			andachieve						the				ri			ght						scale			of			produc			t			ion.						Ach			iev			ingeconom			ies						of			scale						was						the			only			sol			u			t			ion			in						t			he				f			ace						of						ri			s			ing						input			and			l			abour			cos			ts.															F							UEL								PRICES								A				ND								D				E				M				AND								FOR								P				A				SS				ENG				ER								C				ARS																T		he						ri			se						in						t			he			pr			ice			of			crude			oil			had			not			helped						t			he						cause			of						the			automobile			sec			tor						in						India.			Fuel						p			ri			ceshad						i			ncr			eased,						whi			ch			si			gn			i			f			ican			tly						i			mpact			ed						t			he						g			row			th			of						the						sec			tor.						In			2014,						whi			le			add			ressing						t			he			media,			Maruti			chai			r			man						R.C.						Bhar			gava						in						fact			put				t			he blame						for			dec			l			iningsa			lessquarely on			increases			in			the			pr			ices			of			pe			tr			ol			and			di			esel.			These						p			r			ices			had						i			ncr			eased			by			20			per						cent						in						the						last						t			wo						yea			rs,			adverse			ly			i			mpacting			car			sales.			The							pr			ice			of			pe			tr			ol						w			as			de			regul			a			ted						in						India			and						was						l			inked						to						c			rude						o			il			pr			ices.				T			he			pri			ce						of						c			rude			oil			had						i			ncreased						f			rom$25.64			per			bar			rel						in			2001				to			around			$110			per			bar			r			el						in			2014			(see Exhi			b			it			7			).						A			part						f			rom				the						r			ise						in						c			rude			pr			ices,						local						t			axes						on						pet			roleum			produc			ts			were						very						h			i			gh						in						India,			which						fur			ther						raised						the						p			ri			ces.						T			he						d			iesel			pr			ice						w			as						regulat			ed			and						kept						low						through						subs			idies.						T			h			ishelped			car						manuf			act			u			rers						l			i			ke			Maruti						to			cha			r			ge			a						p			r			e			m			i			um			on			diesel						cars.						However,						t			he			pr			ice			of			di			esel			was							slow			ly being de			regul			a			ted						in						India.Wi			th			a			new			un			ion						government						that						w			as						f			i			r			m			ly			focusedon						ref			o			r			ms,			the										d			iesel			pr			ice						w			ould			soon			be			de			regul			a			ted.						Once						t			h			is			occu			r			red,						d			iesel						var			ian			ts			of			ca			rs						wou			ld						lose						t			heiredge							over			petrol						var			iants.						The						deregul			a			ted						d			iesel			pr			ice						would						f			u			rt			her			adversely						i			mpact						the			demand						forautomobi			les						in			India.									P							ROFIT				ABILITY										Mar			u			ti						had			been			ab			le						to						mai			n			tain			a			steady						ri			se						in						p			rof			its						desp			i			te			cha			l			lenges						that						were			beyond						t			he			con			tr			ol of						the			company,			such			as						incr			eased			costs			and						fuel						p			r			ices						that			af			fec			ted						t			he						demand						f			or			cars.						In			2002,						itpost			ed			a			net						p			rof			i			t											16																of						I			N			R1.04			bi			l			l			ion,			a						mere			1.5			per			cent						of			net						sales.						In			2014,			Mar			u			t			i			’s						net			prof			its						had			ri			sen						to			I			NR27.83			bil			l			ionor			6.3						per						cent						of			net						sales (see			Exh			ibi			t			6			).						Mar			u			ti						remained			focusedon			maxi			m			i			z			ing shareho			lde			rs’						weal			th			despi			te				the			compet			i			ti			ve						mar			ket			env			ironmen			t.			Each			year,						Mar			u			t			i			’s			financial						r			esul			ts						exceeded						mar			ket			expectat			ions.																				DECI				SION								TO								ENT				ER								G				U				J				A				R				AT																			Mar			u			ti			had been			con			templat			ing ent			e			ring			G			u			jar			at						and set			t			ingup			a										p			lant						wi			th			an						ins			t			a			l			led						capac			i			tyof 300,000						uni			ts						per						year						w			i			th			an						invest			ment			of						I			NR60			bi			l			li			on.						It						was			expected						that			any			new						facil			ity						would			be						more			eff			icient,						as						it						wou			ld			use			the						latest				technology			and			subsequen			tly			the										cost			of			product			ion						wou			ld			be			lower.			Theref			o			re,			once			ope			rat			iona			l,						the						fac			i			li			ty						would			help			Ma			ruti						achieve			bet			t			er			econom			ies						of						scale			so			that						it						could						compete			bet			t			er			and			sustain			i			ts			pr			o			f			i			ts.						Ho			wever,			set			ting up			a			new			pl			ant						was			a						messy affair						in			India,						w			ith						regul			a			t			ions						rel			ated						to			ever			y			thing				from			land			acqu			isi			t			ion						to						obt			a			i			n			ing			clea			rances				from several			m			inist			r			ies.						The			Tata						Nano’s			Singur						p			lant						debac			l			e											17																w		as			st			i			ll						f			resh						in			ever			ybody			’s						m			e			mor			y.						Bhar			gava			had			various			quest			ions				to			cons			i			der.						Could			he				find			a						way			to										increase			pr			ices				to			ach			ieve			hi			gher			pr			o			f			i			tab			i			l			it			y,						thus avoiding						the						capi			t			al			expendit			u			re						of			bu			il			d			ing			a			pl			ant?			Would						the			bui			l			d			ing			of			a			new			plant						rea			lly			sus			tainprof			i			ts			or						w			ould						it						take			so						long						that						it						wou			ld			not						be						w			o			rth						the						i			n			i			t			ial						inves			t			ment?																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																																	EX							H							IBIT				1:				DO				M				ES				TIC								S				A				L				E				S,								E				XP				ORTS								A				ND								T				O				T				AL								S				A				L				ES								(UNIT				S)								OF								M				A				RUTI								C				A				RS																																																		2013-14														2012-13														2011-12														2010-11														2009-10														2008-09														2007-08														2006-07														2005-06														2004-05														2003-04														2002-03														2001-02														2000-01																																																																																								792167														764842														674924														561822												536301												472122												362426														352404														350814																1155041														1171434														1133695												1271005														1018365																																																																																																																														To		tal			Exports Dom			e			stic																																																													Sou							rc							e							:								Va				ri				ous								ann				u				al								r				epo				rts								of				Ma				r				u				ti;								“				Our								F				i				nan				ci				a				ls,”				Ma				r				u				ti								S				u				z				u				ki,																							ww													w													.													m													a													r													u													tisu													z													u													ki.													c													o													m													/fi													n													a													n													ci													a													l.													a													s													px													,																									a							cc							es							s							ed Sep							te							m							b							e							r								12,								2				0				14.																													EX							H							IBIT				2:								M				O				T				OR								VEHICLE								PRODUCTION,								C				AR								PE				N				E				TR				A				TION								A				ND								P				ER								C				A				PITA				INCO				ME								OF								SE				L				ECT				COUNTRIES																																																																																																											Count								ry																																																					M																			oto																			r																Vehicle																																								Pr																			odu																			ction																										(																			in								2014)																																																					A																			u																			tomob																			ile																																								Density																(Ca								rs								per								1,000																																								P																			eople)																																																					P																			er								Capita																																								Income																																								in								US								$P								PP								in 2013–14																																																				India																																		4,145,194																																		12																																								$3,843																																								Chi							na																																		19,271,808																																		44																																								$9,055																																								B						r						a						zi						l																																		3,342,617																																		178																																								$11,747																																								Russ							ia																																		2,231,737																																		233																																								$17,518																																								U.K.																																								1,576,945																																		457																																								$36,569																																								Fr						ance																																		1,967,765																																		481																																								$35,295																																								U.S.																																								10,328,884																																		423																																								$51,714																																								J						apan																																		9,942,711																																		453																																								$35,855																																								G						er							many																																		5,649,269																																		517																																								$38,666																																		No							t							e							:								Per								c				ap				ita				i				n				c				o				me				(				PPP)								r				e				f				e				rs				to				how								m				a				ny				U.				S.								do				ll				a				rs				a				re				r				equ				ir				ed				to				buy				a				p				r				e				-				de				fi				ned				ba				sk				et								of								c				o				m				m				o				d				iti				es								in								d				iff				e				r				ent								c				oun				tri				e				s.								It								is								d				i				f				f				e				r				ent								from				t				he								o				ffici				al								ex				c				hange								r				a				te								c				on				v				e				rsi				on								of								per								c				ap				ita								i				n				co				m				e.								It								d				iff				e				rs								fr				om				c				o				u				n				try								to c				oun				try,								ba				s				ed								on								t				he								pu				rc				ha				si				ng								p				o				wer								of				a								c				u				rr				ency								in								t				he								d				o				m				e				stic								e				c				on				o				m				y.								For								e				xa				m				p				le,								if								one								r				equ				ir				es								US$1				00								to				buy									a				p				r				ede				fi				n				ed				ba				sk				et								in				t				he								Un				it				ed				S				t				a				t				e				s,								and				if								t				he				sa				me				b				a				sk				et				c				an				be				pu				rc				ha				s				ed				in				I				nd				ia								f				or								I				NR4				,				000,								t				hen				t				he				PPP				e				xc				hange				r				a				te				is								I				NR40				/				US				$				1,								whe				r				eas								t				he								o				ffici				al								e				xc				hange				rate				is								a				r				ound								I				NR60				/				U				S				$1.								P				er								c				ap				ita				i				n				co				me				in				U				S				$PPP								is				a				be				tt				er								i				nd				ic				a				t				or								of					t				he				a				ff				o				r				dab				ili				ty								of								bu				yi				ng a				c				ar								t				han				n				o				m				i				nal					p				er								c				ap				ita				i				n				c				o				m				e.																Sou							rc							e							:								T				he Wo				rld								B				a				n				k,								“				Pa				ss				enger								c				a				rs								(				per								1				,0				00								p				e				op				l				e				)				,”																							h													tt													p													://													da													t													a													.													wo													rl													db													a													n													k.													o													r													g													/i													nd													ic													a													t													o													r/I													S													.													VEH													.													PCAR													.													P3													,																		a				cc				es				s				ed				Sep				te				m				b				er								12,								20				1				4.																																		EX							H							IBIT				3:								TRENDS				IN								M				A				RK				ET								S				H				A				RE								OF								M				ARUTI								AND				ITS				CO				M				PE				T				I				T				O				RS				IN								INDIA																(		Mar			ket						Share						in			Percentages)																																																																																																																																																																Y																			ear																																																					M																			ar								uti																S								uzuki																																																					H																			y																			und																			ai								M								oto								rs																																																					T																			ata								M								oto								rs																																																					M																			ahind								ra																																								&								Mahind								ra																																																					T																			o																			y																			ota																										M																			oto																			r																			s																																																					Oth																			ers																																																				2002																																		50																																								13																																								13																																								7																																								4																																								13																																														2003																																		46																																								15																																								15																																								7																																								4																																								13																																														2004																																		46																																								14																																								16																																								8																																								5																																								11																																														2005																																		46																																								13																																								17																																								8																																								4																																								12																																														2006																																		46																																								14																																								17																																								7																																								4																																								12																																														2007																																		46																																								14																																								16																																								6																																								4																																								14																																														2008																																		46																																								14																																								15																																								8																																								4																																								13																																														2009																																		47																																								16																																								15																																								8																																								3																																								11																																														2010																																		45																																								16																																								15																																								8																																								3																																								13																																														2011																																		45																																								14																																								14																																								7																																								3																																								17																																														2012																																		44																																								14																																								13																																								8																																								6																																								14																																														2013																																		49																																								21																																								6																																								7																																								3																																								13																																								No							t							e							:								F				i				gu				r				es								w				e				re				r				o				u				n				d				ed				o				ff.													Sou							rc							e							:								Da				ta								co				m				p				il				ed								by								t				he								a				u				t				hor								from								S				o				ci				e				ty								of								I				nd				i				an								Au				t				o				m				ob				ile								M				a				n				u				f				a				ct				u				r				e				rs,																							ww													w													.sia													m													i													nd													i													a													.co													m													/													;																									I							C							R							A								L				i				m				it				ed,																			ww													w													.icr													a													.i													n													/													F													il													e													s/													t													i													c													k													e													r/													PV													-I													ndu													st													r													y-													201103													.p													d													f													;																									Sha							ll							y								Se				th				Moh				il				e,								“Ma				r				u				ti								S				u				z				u				k				i				’s				Ma				rk				et								Sha				re								R				is				es								to								H				i				ghe				st								in													Th							r							e							e								Y				ea				rs,”													L					ive					Mi					n					t				,								J				anua				ry								13,								2014,																							ww													w													.live													m													i													n													t.co													m													/													C													o													m													p													a													n													i													e													s													/													z													2													z													c													A													j													z													ly													Oe1													Il													q													Mi						R						fk						w						J/Ma						r						u						t						i						-						S						u						z						u						kis-						m						a						rk						e						t-																				s							ha							r							e							-ris							e							s-t							o							-							h							i							ghe							st							-							i							n							-t							h							r							ee							-							yea							rs.							h							t							m							l							;								and								Ra				vi								K				is				ho				re								O				ak				u				ri,								“Ma				r				k				et								Sha				re								of								Au				to				m				o				b				i				le								C				o				m				p				an				i				es								in								In				d				ia								2				013:Top									P					l					a					y					er											in													I							ndu							stry,”															J								u								ly																	6,																			2014,																																																																				ww													w													.c													u													rr													en													t													wee													k.co													m													/													m													a													rk													e													t-s													ha													r													e													-													o													f-													au													to													m													ob													il													e													-													co													m													p													an													i													e													s													-i													n													-i													nd													i													a													-													20													1													3													t													op													-																				p							l							a							y							e							rs-i							n							-							i							ndu							str							y							/							.								Sou				rc				es				ac				c				e				ss				ed				Sep				te				m				ber								18,								2				0				14.															EX				H				IBIT			4:				EX			-			SHO			WRO			OM						PRICES						OF						M			ARUTI						C			A			RS						A			ND			CO			M			PE			TITORS				(	INR				in hundred		thousand)																																																												Year																																																																		Ma																ruti							Alto							LX																																																												Ma																ruti							800																																																																		H																y																undai Santro																																																												Tata Indica																																																												Che							vrolet Spark																																											Ma																ruti														S							wift																																	Dzire							LXI																																											SX4																																	VXI																																									Aug-02																											2					.99																											2					.81																											3					.36																											3					.19																											**																											**																											**																															Apr-03																											2					.99																											2					.56																											3					.36																											3					.17																											**																											**																											**																															No						v-03																											2					.87																											2					.56																											3					.46																											3					.14																											**																											**																											**																															Apr-04																											2					.65																											2					.26																											3					.3																											3					.14																											**																											**																											**																															Aug-06																											2					.81																											2					.24																											3					.24																											2					.75																											**																											**																											**																															Sep-07																											2					.81																											2					.2																											3					.28																											3					.38																											3					.09																											**																											6					.18																															O					c					t-08																											2					.82																											2					.29																											3					.48																											3					.65																											3					.17																											4					.89																											6					.54																															Jun					-09																											2					.57																											2					.06																											3					.21																											3					.29																											3					.17																											4					.54																											6					.36																															Feb-10																											2					.5																											2					.21																											3					.44																											3					.38																											3					.19																											4					.6																											6					.68																															O					c					t-11																											3					.01																											2					.22																											3					.76																											3					.24																											3					.54																											5					.32																											7					.73																															Apr-12																											3					.01																											2					.22																											3					.76																											3					.24																											3					.75																											5					.3																											7					.73																															Sep-13																											3					.12																											2					.42																											3					.76																											3					.4																											3					.57																											5					.38																											7					.73																															Apr-14																											^^																											^^																											3					.66																											3					.85																											3					.45																											4					.85																											7					.15																			EX				H				IBIT			5:						M			ARUTI’S			CO			M			PE			T			I			TORS			BY						M			ODEL																													M																odel																																											Launch														D							ate																																											Competitors																																									800																																1983																																T					a					ta						Nano																															O					mn					i																											1984																																T					a					ta						Nano,												T						ata						Ve						nture																															Gy					ps					y																											1985																																M					ahind					ra												THARcRDe,												T						ata						Sumo,												M						ahind						ra												X						y						lo																															W					ag					o					n						R																											1999																																Niss						an												M						icra						Ac						t						i						v						e,						Hy						und						ai												i						10																															Alto																											2002																																Hy						undai						Sa						ntro,						Ch						e						vrolet												S						p						ark,												T						ata												I						nd						i						ca																															Sw						ift																											2005																																T					a					ta						Vista,						Hy						undai												i						2						0,						Šk						o						d						aFab						i						a,						Vo						l						k						s						w						agen						Po						l						o,												T						o						y						ota						Eti						os						L						i						va																															SX4																											2007																																Ford						Fi						e						sta,						Hy						und						ai						Verna,						Honda						City,						Ško						da						Rapid,						Vol						ks						w						agen						Ven						t						o,						Renault						Sc						a						la,						Ni						s						s						an						Su						nny																															Sw						ift												Dz						ire																											2008																																Honda						Am						a						z						e,						Hy						undai												X						cen						t,												M						ahindra													Verito,												T						o						y						ota						Etio						s,						Ford						Cl						a						s						si						c,						Che						vrolet						Sa						il,												T						ata												M						an						za																															A-Star																											2008																																Che						vrolet						Be						at,						Ni						s						s						an												M						icra						Acti						v						e,												F						ord												F						igo																															Ritz																											2009																																T					a					ta						Vista,						Hy						und						ai												Grand												i						1						0,						Hon						da						Bri						o,						Ni						ss						an												M						icra,						Rena						u						lt						Pu						ls						e,						T						o						y						ota						Etios						L						i						va																															Eeco																											2010																																T					a					ta						Venture,												T						ata												W						in						ger																															Alto						K10																											2010																																Che						vrolet						Sp						ark,							T						ata						In						d						ic						a,						Hy						undai												i						10																															Ertiga																											2012																																T					o					y					o					ta						Inno							v							a,															M								ahindra								Xy									lo,									Niss										an										Ev											alia,																							T												ata												Sumo																											Grand														e, Che														vrolet																												T														a														v														era,														Che														vro														let																												E														njoy																																																																																																			Alto8						00																											2012																																T					a					ta						Nano,						Che						vro						let						Sp						ark,							T						ata						In						di						c						a,						Hy						un						d						ai						Eon																															Stingray																											2013																																Che						vrolet						Be						at,						Ch						e						vrolet												S						ail																															Celerio																											2014																																Hy						undai												i						10,						Ch						e						vrolet												B						eat,						Honda						Brio																			EX				H				IBIT			6:						Y			E			ARWISE						R			E			V			ENU			E,			CO			S			TS						A			ND						N			ET				PROFITS						FOR						M			ARUTI				(	A	s		of March		31 of each		y		ear;		INR			in				b		i		ll		ions)																										Y																ear																																											T																ot																al Revenue																																											Raw							Materials																																											E																mplo							y							ee Cost																																											S																elling							&							A							d							min							ist							rative																																	&														Other							Man							u							factu							ring							Expen							ses																																											Net														Pr							ofit																																									2001																											70.2																																58.8																																1.99																																6.33																																-					2.69																																				2002																											75.3																																58.3																																2.27																																6.95																																1.04																																				2003																											73.6																																55.6																																2.17																																6.78																																1.46																																				2004																											94.8																																69.7																																2.93																																6.07																																5.42																																				2005																											114.6																											85.6																																1.91																																6.72																																8.53																																				2006																											126.8																											93.3																																2.11																																8.09																																11.89																																				2007																											150.5																											107.3																											2.26																																10.95																																15.62																																				2008																											190.6																											137.9																											3.46																																13.39																																17.30																																				2009																											211.7																											157.6																											4.63																																18.08																																12.18																																				2010																											301.2																											223.6																											5.38																																24.31																																24.97																																				2011																											375.2																											285.5																											7.03																																35.22																																22.88																																				2012																											364.1																											282.3																											8.43																																32.67																																16.35																																				2013																											444.1																											305.7																											10.69																											64.99																																23.92																																				2014																											445.5																											313.14																											13.68																											59.22																																27.83																							Sou				rc				e				:						Cap			it			a			line						Da			t			aba			s			e			s,																ww										w										.c										ap										it										a										li										ne										.co										m										,																		a				cc				e				ss				e				d						Sep			te			m			b			er						1			2,						2			014;						a			nd						v			a			ri			o			us						ann			u			al						r			e			p			o			rts						fr			om Ma			r			u			ti, Ma			r			u			ti						S			u			z			u			ki				I			nd			ia			L			i			m			it			ed,				“			O			ur						F			i			nan			ci			a			ls,”																ww										w										.										m										a										r										u										tisu										z										u										ki.co										m										/fi										nan										ci										a										l.										a										s										p										x										,																		ac				c				e				ss				e				d			S			ep			te			m			b			er						12,						20			1			4.							EX				H				IBIT			7:						TRENDS			IN			C			O			MM			ODITY						PRICES						(			M			A			J			OR						R			AW						M			A			T			ERI			A			L			S			),			2001–2014																					Y					ear																											Al					um						inum						US$/Tonne																											Copper US$/Tonne																											Lead US$/Tonne																											Rubber US$/Tonne																											P					al						l						adium						US$/O						unce																											B					r					ent Crude																						P					r					i					c					es																	$/Barr						el																																Iron,										S					teel						&																	F					erro												A						l						l						o						ys												(Index)																																				2001																											1,615.65																											1,787.05																											477.89																											693.70																											1,041.55																											25.64																											137																															2002																											1,368.59																											1,503.60																											512.84																											647.90																											409																																19.48																											137																															2003																											1,378.28																											1,647.35																											444.78																											1,011																											255.32																											31.29																											150																															2004																											1,606.49																											2,423.11																											758.82																											1,371																											216.58																											31.18																											201																															2005																											1,833.94																											3,169.18																											953.61																											1,329.40																											186.03																											44.28																											244																															2006																											2,377.45																											4,733.67																											1,256.62																											1,932.40																											274.32																											63.57																											237																															2007																											2,808.34																											5,668.69																											1,665.11																											2,110																											337.05																											54.30																											271																															2008																											2,445.08																											7,060.10																											2,608.47																											2,705																											374.20																											91.45																											337																															2009																											1,412.79																											3,220.20																											1,134.64																											1,607																											188.63																											44.86																											307																															2010																											2,234.84																											7,385.67																											2,370.22																											3,202.40																											434.10																											76.37																											310																															2011																											2,439.13																											9,554.75																											2,597.44																											5,591.90																											793.10																											96.29																											349																															2012																											2,143.82																											8,042.97																											2,093.74																											3,856.90																											659.14																											110.99																											386																															2013																											2,037.70																											8,048.76																											2,339.82																											3,271																											712.59																											112.93																											405																															2014																											1,726.20																											7,299.46																											2,150.20																											2,365.90																											734.14																											107.57																											412*																	1.							Outlinethe important determinants of demand for automobiles. How are cross and incomeelasticity of demand relevant to Maruti’s managerial decisions? (10 Marks)		2.				What kind of market structure prevalent in theIndian Automobile industry? What are the Maruti’s competitive advantages? Howcan Maruti sustain its profitability in the future? (10 Marks)

Komalavalli · Accepted Answer

1. An automobile is a valuable possession. It establishes a service stream. As a result, purchasing an automobile is both consumption and a saving act. This suggests that the choice to acquire an automobile is an example of long-term decision making. When selecting to purchase a car, households evaluate both present and future income, and they are aware that the vehicle will give benefits for many years. Furthermore, because a car is an asset, its value today is determined by its future worth. We may purchase a car this year only to discover that your travel requirements have altered. We can sell your automobile on the used car market in this instance. The more we anticipate getting for your car when you sell it, the more you're willing to pay for it now. The demand determinants of automobile are purchasing power of consumer, price of fuel, interest rate in the economy. Cross elasticity measures the responsiveness of one product's amount required to a change in the price of another. Cross-elasticity and income elasticity are critical to Maruti's management decision-making since they aid in the development of a better pricing strategy.
2. Car manufacturing is an example of an oligopolistic market structure because it involves only a few firms. Companies typically produce similar or less differentiated products and compete in terms of price, volume, and even market reputation. An oligopoly market is one dominated by a limited number of providers. They may be found in every country and in a wide range of sectors. Some monopolistic marketplaces appear to be competitive, while others appear to be less so. Competition authorities are frequently called upon to examine charges of collusion or a lack of fair competition.
However, determining the root cause of sub competitive activity in oligopolistic firms can be difficult, and how it occurs (e.g., through a clear agreement between firms to limit competition or something less) can have a significant impact on the analysis and tools available.

MARUTI SUZUKI INDIA LIMITED: SUSTAINING PROFITABILITYAfter India opened upits economyin the early1990s, the Indian automobileindustry witnessed intensecompetition. Maruti Suzuki India Limited (Maruti)...

Answer To: MARUTI SUZUKI INDIA LIMITED: SUSTAINING PROFITABILITYAfter India opened upits economyin the...

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Count ry	M oto r Vehicle Pr odu ction ( in 2014)	A u tomob ile Density (Ca rs per 1,000 P eople)	P er Capita Income in US $P PP in 2013–14
India	4,145,194	12	$3,843
Chi na	19,271,808	44	$9,055
B r a zi l	3,342,617	178	$11,747
Russ ia	2,231,737	233	$17,518
U.K.	1,576,945	457	$36,569
Fr ance	1,967,765	481	$35,295
U.S.	10,328,884	423	$51,714
J apan	9,942,711	453	$35,855
G er many	5,649,269	517	$38,666

Y ear	M ar uti S uzuki	H y und ai M oto rs	T ata M oto rs	M ahind ra & Mahind ra	T o y ota M oto r s	Oth ers
2002	50	13	13	7	4	13
2003	46	15	15	7	4	13
2004	46	14	16	8	5	11
2005	46	13	17	8	4	12
2006	46	14	17	7	4	12
2007	46	14	16	6	4	14
2008	46	14	15	8	4	13
2009	47	16	15	8	3	11
2010	45	16	15	8	3	13
2011	45	14	14	7	3	17
2012	44	14	13	8	6	14
2013	49	21	6	7	3	13

Year	Ma ruti Alto LX	Ma ruti 800	H y undai Santro	Tata Indica	Che vrolet Spark	Ma ruti S wift Dzire LXI	SX4 VXI
Aug-02	2 .99	2 .81	3 .36	3 .19	**	**	**
Apr-03	2 .99	2 .56	3 .36	3 .17	**	**	**
No v-03	2 .87	2 .56	3 .46	3 .14	**	**	**
Apr-04	2 .65	2 .26	3 .3	3 .14	**	**	**
Aug-06	2 .81	2 .24	3 .24	2 .75	**	**	**
Sep-07	2 .81	2 .2	3 .28	3 .38	3 .09	**	6 .18
O c t-08	2 .82	2 .29	3 .48	3 .65	3 .17	4 .89	6 .54
Jun -09	2 .57	2 .06	3 .21	3 .29	3 .17	4 .54	6 .36
Feb-10	2 .5	2 .21	3 .44	3 .38	3 .19	4 .6	6 .68
O c t-11	3 .01	2 .22	3 .76	3 .24	3 .54	5 .32	7 .73
Apr-12	3 .01	2 .22	3 .76	3 .24	3 .75	5 .3	7 .73
Sep-13	3 .12	2 .42	3 .76	3 .4	3 .57	5 .38	7 .73
Apr-14	^^	^^	3 .66	3 .85	3 .45	4 .85	7 .15

M odel	Launch D ate	Competitors
800	1983	T a ta Nano
O mn i	1984	T a ta Nano, T ata Ve nture
Gy ps y	1985	M ahind ra THARcRDe, T ata Sumo, M ahind ra X y lo
W ag o n R	1999	Niss an M icra Ac t i v e, Hy und ai i 10
Alto	2002	Hy undai Sa ntro, Ch e vrolet S p ark, T ata I nd i ca
Sw ift	2005	T a ta Vista, Hy undai i 2 0, Šk o d aFab i a, Vo l k s w agen Po l o, T o y ota Eti os L i va
SX4	2007	Ford Fi e sta, Hy und ai Verna, Honda City, Ško da Rapid, Vol ks w agen Ven t o, Renault Sc a la, Ni s s an Su nny
Sw ift Dz ire	2008	Honda Am a z e, Hy undai X cen t, M ahindra Verito, T o y ota Etio s, Ford Cl a s si c, Che vrolet Sa il, T ata M an za
A-Star	2008	Che vrolet Be at, Ni s s an M icra Acti v e, F ord F igo
Ritz	2009	T a ta Vista, Hy und ai Grand i 1 0, Hon da Bri o, Ni ss an M icra, Rena u lt Pu ls e, T o y ota Etios L i va
Eeco	2010	T a ta Venture, T ata W in ger
Alto K10	2010	Che vrolet Sp ark, T ata In d ic a, Hy undai i 10
Ertiga	2012	T o y o ta Inno v a, M ahindra Xy lo, Niss an Ev alia, T ata Sumo Grand e, Che vrolet T a v era, Che vro let E njoy
Alto8 00	2012	T a ta Nano, Che vro let Sp ark, T ata In di c a, Hy un d ai Eon
Stingray	2013	Che vrolet Be at, Ch e vrolet S ail
Celerio	2014	Hy undai i 10, Ch e vrolet B eat, Honda Brio

Y ear	T ot al Revenue	Raw Materials	E mplo y ee Cost	S elling & A d min ist rative & Other Man u factu ring Expen ses	Net Pr ofit
2001	70.2	58.8	1.99	6.33	- 2.69
2002	75.3	58.3	2.27	6.95	1.04
2003	73.6	55.6	2.17	6.78	1.46
2004	94.8	69.7	2.93	6.07	5.42
2005	114.6	85.6	1.91	6.72	8.53
2006	126.8	93.3	2.11	8.09	11.89
2007	150.5	107.3	2.26	10.95	15.62
2008	190.6	137.9	3.46	13.39	17.30
2009	211.7	157.6	4.63	18.08	12.18
2010	301.2	223.6	5.38	24.31	24.97
2011	375.2	285.5	7.03	35.22	22.88
2012	364.1	282.3	8.43	32.67	16.35
2013	444.1	305.7	10.69	64.99	23.92
2014	445.5	313.14	13.68	59.22	27.83

Y ear	Al um inum US$/Tonne	Copper US$/Tonne	Lead US$/Tonne	Rubber US$/Tonne	P al l adium US$/O unce	B r ent Crude P r i c es $/Barr el	Iron, S teel & F erro A l l o ys (Index)
2001	1,615.65	1,787.05	477.89	693.70	1,041.55	25.64	137
2002	1,368.59	1,503.60	512.84	647.90	409	19.48	137
2003	1,378.28	1,647.35	444.78	1,011	255.32	31.29	150
2004	1,606.49	2,423.11	758.82	1,371	216.58	31.18	201
2005	1,833.94	3,169.18	953.61	1,329.40	186.03	44.28	244
2006	2,377.45	4,733.67	1,256.62	1,932.40	274.32	63.57	237
2007	2,808.34	5,668.69	1,665.11	2,110	337.05	54.30	271
2008	2,445.08	7,060.10	2,608.47	2,705	374.20	91.45	337
2009	1,412.79	3,220.20	1,134.64	1,607	188.63	44.86	307
2010	2,234.84	7,385.67	2,370.22	3,202.40	434.10	76.37	310
2011	2,439.13	9,554.75	2,597.44	5,591.90	793.10	96.29	349
2012	2,143.82	8,042.97	2,093.74	3,856.90	659.14	110.99	386
2013	2,037.70	8,048.76	2,339.82	3,271	712.59	112.93	405
2014	1,726.20	7,299.46	2,150.20	2,365.90	734.14	107.57	412*