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

1 answer below »








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
ly
1990s,

the

Indian
au
tomobile

industry
w
i
tnessed
intense
competi
t
ion.

Mar
u
ti
Suzuki

India
Li
m
ited

(Ma
rut
i)

had
been
a
dom
inant
player
in
t
he

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

long
used

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

of
consistent

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
t
o
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
he
sector.

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

poor
pri
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

he
costs

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
ndias

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
ty
of

Indias
popu
l
a
tion cou
ld

not aff
o
rd

to
buy
a
ca
r,
and
car


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

Indias
aff
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

Indias
huge
pool

of

t
a
lent
and

r
ising
income

levels,

Indias

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
y
ears.



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
per
cent



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
row
at
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,
a
car

was
consi
dered
a
pr
i
zed
possess
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
rom
other

Asi
an
count
r
ies.
T
he

t
wo companies
w
i
th

t
he

lar
gest

market

share

in

India

were Ma
rut
i,

at
49
per
cen
t,

and

H
yundai,

at
21
per



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
her
competit
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.
T
hese
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
gaon
and Manesar

(both

in
the

National

Cap
i
tal

Reg
ion of

Del
h
i),
had a

p
roduct
ion
capac
ity
of

more
t

han
1.4

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
than
16 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

from
other

models
of
Maruti
ca
rs.

F
rom
the

Ma
ruti
800
i
n

1983
up
t
o
t
he

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
of
qual
ity
and
val
ue
f

or

money.














Mar
u
ti
f
ocused
on

t
h
ree

key strateg
i
es

to

gener
a
te
sa
les.
Fi
rst
and

foremost,

i
ts

p
ri
c
ing
str
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
l
ow
er
t
han competing
models
such
as
t
he

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,
Maruti
off
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
uel
ef
f
i
c
iency and
r
e
li
abi
l
i
t
y,
and

i
ts
sa
l
es

were
boos
ted
by
the
prom
ise

of

e
f
f
icient
af
ter-sales
se
r
v
ice.
The
uncer
t
a
inty
of

get
ting

s
tuck
on

Indian
roads
due
to

machine
ry
f
a
il
u
re

was ef
fec
ti
vely
exp
loi
ted
by 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
as
also
f
ar
hi
gher
t
han

that
of
any
of

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
t
o
buy
a
new
ca
r, Mar
u
ti
w
as

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,
T
ata
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
ioning
ent
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
t
han
80
per

cent
of
Ma
rut
i
s
t

o
tal
sa
les,
ca
r
r
ied
pr
ice
t
ags
t
hat

were

at

least
20–30
per

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
t
he

A
lto
and
t
he
800.

T
he
pr
ices
of
t
hese

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

launch
pri
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
r
educt
ion

of approx
i
mately
14
per

cent
af
ter
seven

years.

T
he

p
ri
ce
of
t
he
800

model

was

I
N
R281,000

i
n
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
cars
over



this
pe
ri
od,

which
boosted
the

revenue
of

the
company.














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

looked
car
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
t
he

years;
t
hey
had

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
by
9.8
per
cent.

T
hough

it



was
never

easy

for
car

manufac
turers

to
reduce
pr
i
ces,
they

were

left

w
ith no
cho
ice
but

to
sell

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
i
n
Maruti
s
r
evenue
even

though

sales

volumes

f
e
ll

f
rom
2011
t
o
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

than
500

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
t
o a

r
ise

in
un
it
sal
es
and
mar
g
inal

increases
i
n

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
i
ncreased
by

at

least
thr
ee

ti
mes

(see
Exh
ibi
t7)
si
nce
2001.



13




A
part

f
rom
stee
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
r
aised
t
he
cost

of

p
roduc
t
ion.















L


abour
Costs









T
he
cost


of

l
abour

had

gone
up
si
gni
f
i
cant
ly
due

to

the



r
ise
in

gener
al
pr
i
ce

l
evels

(i
n
f
lat
ion)
i
n

India.

Though

Mar
u
ti
depended

heav
ily
on
con
tr
act
ual

labo
u
rers
t
o
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
i
ssues

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
he
compensat
ion

packages

g
i
ven

to

i
ts
employees.
This
had
r
esu
l
ted
i
n
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
ay
be

noted

that

a
long

w
ith

Mar
u
t
i
s
cos
ts,

the

l
abour

costs
per

unit

for
it
s

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
being
so

f
iercely compet
it
i
ve,
Mar
u
ti
needed

to
spend
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
to
a

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
i
ndus
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

very
di
ff
icu
lt
t
o

sustain
pr
o
f
it
l
evels

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
ring
costs
down.

Manu
fac
turers
cont
inued
t
o

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
ising
costs,
the
company
faced
major
cha
l
lenges,
as
t
he
re

was
no cushion
a
llow
ing
it
t
o 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
t
he
ques
tion,

the
on
ly sol
u
ti
on

lay
in

achiev
ing
techni
cal
ef
fic
iency
and
econom
ies
of
scal
e.
The

gap

bet
ween
the
average
cost
and

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
i
nnovate
const
antly
t
o
cut
down

cos
ts
and
achieve

the
ri

ght

scale
of
produc
t
ion.

Ach
iev
ing
econom
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
ces
had

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
ining
sa
les
squarely 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
t
o
around
$110
per
bar
r
el

in
2014
(see Exhi
b
it
7
).

A
part

f
rom
t
he

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
is
helped
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
focused
on

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
heir
edge


over
petrol

var
iants.

The

deregul
a
ted

d
iesel
pr
ice

would

f
u
rt
her
adversely

i
mpact

the
demand

for
automobi
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,

it
post
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
ion
or
6.3

per

cent

of
net

sales (see
Exh
ibi
t
6
).

Mar
u
ti

remained

focused
on
maxi
m
i
z
ing shareho
lde
rs’

weal
th
despi
te
t
he
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
ing
up
a



p
lant

wi
th
an

ins
t
a
l
led

capac
i
ty
of 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
t
echnology
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
fr
om

land
acqu
isi
t
ion

to

obt
a
i
n
ing
clea
rances
fr
om 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
t
o
cons
i
der.

Could
he
fi
nd
a

way

to



increase
pr
ices
t
o
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
tain
prof
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:
To
p

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
P
ROFITS

FOR

M
ARUTI
















(
A
s
of March
31 of each

y
ear;
INR
i
n

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.




Outline
the important determinants of demand for automobiles. How are cross and income
elasticity of demand relevant to Maruti’s managerial decisions? (10 Marks)














2.


What kind of market structure prevalent in the
Indian Automobile industry? What are the Maruti’s competitive advantages? How
can Maruti sustain its profitability in the future? (10 Marks)






















Answered 2 days AfterNov 17, 2022

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

Komalavalli answered on Nov 19 2022
10 Votes
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. This has the potential to create gaps in...
SOLUTION.PDF

Answer To This Question Is Available To Download

Related Questions & Answers

More Questions »

Submit New Assignment

Copy and Paste Your Assignment Here