14 March 2007 Competition & Strategy

Submitted by: Aman Sethi (0611217) Karishma Athavia (0611234) Pradeep Shekhawat (0611241) Prasun Basu (0611244)

Introduction Maruti - Strategic Challenge Industry Analysis - 2001 Maruti - Resource View Sustainable Competitive Advantage Mapping Needs and Capabilities Maruti True Value Maruti Insurance Maruti Warranty & Financing Maruti Game plan Industry Analysis 2006 Conclusion
Company Snapshot Historical Perspective

1942 Hindustan Motors

It is part of the Birla group of industries. It is the producer of the famous Ambassador car, widely used as a taxicab and as a government limousine. One of the original three car manufacturers in India, founded in 1942, it was a leader in car sales until the 1980s, when the industry was opened up from protection.

1995 Daewoo Motors 1996 Hyundai Motors

1995 Ford Motors

Incorporated in May 1996, the groundbreaking ceremony for the Chennai plant was held in December in the same year, and the first pilot Santro was ready in a record 17 months. The Santro (which is available in three variants - the L2, GLS1 and GLS2) was launched in September 1998, and the company has targeted a production of 60,000 Santros per year. With sales of 30,000 vehicles in the last eight months HMIL seems to be fairly on target.

1981 Maruti Udyog

Maruti entered into this collaboration with Suzuki Motors, The collaboration heralded a revolution in the Indian car industry by producing the Maruti 800. The car went on sale on December 14, 1983. It created a record by taking 13 months time to go from design to rolling out cars from a production line. By the year 1993 the company had sold up to 1,96,820 cars, mostly by selling its chief product the Maruti 800s.

1998 Tata Indica

Launched in 1998, the Indica was a trailblazer in more ways than one, and it set Tata Motors on the path to reaching a leadership position in India's passenger car segment. The original Indica variants were followed by the outstanding Indica V2, a runaway bestseller. This car is now also available in the UK, under the label City Rover, following a tie up between Tata Motors and Rover, the British carmaker.

Liberalization (1992-93) Entry easier for new players in the passenger cars segment Change in government policy

Competition (1997-98) Introduction of new and better technologies in passenger cars More variety available to customers

1998 Market Share (Segment A) Approx 90%

2002 40%

Aim: Analyze Marutis strategy to regain market share in Segment A Focus: Segment A of passenger-car segment Limitation: New product development and other segments have been ignored for the purpose of this study

 High capital costs High cost of setting-up distribution Low government protection New entrants can bring learning from other markets

New Entrant : Med

Suppliers : Low
Extremely fragmented with over 500 players Credible threat of backward integration Supplier has high switching cost High fixed costs Capacity added in large increments High exit barriers Low switching costs

Buyers : Low
Products are differentiated Buyers are fragmented Each individual s sale forms a small component of overall sales

Substitutes : High
Low switching cost Close substitutes available

 Presence for 20 years Custome r loyalty

Highest penetrati on Aftersales service

Strong supplier base

Suzukis Tech expertis e Kaizen JIT

Cheap labor

Resource Customer Base Brand Equity Distribution Network Technology Supply Chain Location The

Valuable

Imitable

Substitutable

Returns

primeobjective of the company isto retain its customers and to bring in more customers into its fold

Needs

Capabilities

Outcome

Brand equity Excess capacity with dealers Customer base Brand equity Distributi on network

Warranties Maruti Insurance Car finance

True Value

Customer can sell the car in just one day through a transparent process which entails

Document verification and 120 point standard check

Customer is given Rs 10000 discount on buying new car, if they have turned in an old car Customer can buy a used car with 1 year warranty Stakeholders Maruti
Customers

Get guaranteed second hand products Easy mechanism to dispose off old vehicles

Opens additional business avenue for the dealers

Helps Maruti retain its old customers Adds a new breed of customers who are just entering the market Increases the perceived value of Maruti cars

Customer interacts only with dealership for buying insurance and servicing claims

Maruti interacts with the insurance company for estimation and settlement of claims

Customer only has to pay the deductible and depreciation amounts Stakeholders Maruti

Dealers get guaranteed business for repairs

Dont have to compete

Maruti can offer insurance for discount promotions

Higher perceived value

with the outside repair shops Dont have to put-in money initially for

Customers

as compared to CDs while at lower cost to company

Additional Income from

Extended warranty provided for 1 or 2 years

The warranty covers all mechanical and electrical parts

To avail the warranty the customer has to get the car serviced at the Maruti service centers Customer also given financing options at the dealership where they can compare different options Stakeholders Maruti
Dealers get guaranteed business for repairs
Dont have to compete

Maruti can offer warranty for discount promotions

Higher perceived value

with the outside repair shops

Additional value added services for customers

as compared to CDs while at lower cost to company

Enhances customer

Change the Scope of the game Customer not only

evaluating the new car, but also host of other services along with it

Create a virtuous cycle Creates a one-stop shop which

incentivizes doing business with Maruti on all aspects due to discount offers made available

Increase Added value in the game Its the only player that has
the extensive service network to make these additional services really valuable

Increase switching cost

More loyal customers are harder to break away Other competitors unable to meet Marutis service levels

 High capital costs High cost of setting-up distribution Low government protection New entrants can bring learning from other markets

New Entrant : Med

Suppliers : Low
Extremely fragmented with over 500 players Credible threat of backward integration Supplier has high switching cost High fixed costs High strategic stakes High exit barriers Relatively high switching costs

Buyers : Low
Products are differentiated Buyers are fragmented Each individual sale forms small component of overall sales

Substitutes : Med
Relatively higher switching cost Close substitutes available in car functionality, but not in other services

 Maruti

effectively managed to increase its market share from 40% in 2002 to 59% in 2006 by:
Leveraging its existing competencies Differentiating itself from the competitors Increasing the switching costs

Maruti

used the new business lines to change the scope of the game

Threat does not seem to be credible because: Might not compete in the same segment as Maruti 800
Expected to be a two-seater Even if its a four-seater, the engine capacity is

Maruti

might be better off in waiting and allowing Tata to explore the new market before exploring opportunities for itself

expected to be approx 600 cc, which will limit its performance

Marutis Market Share Compact Car (2002-07)

Marutis Sales Compact Car (2002-07)