A Report by Rupom Hazarika, MBA(Finance & Marketing) dated August 21, 2020.
Memo
To: Mr Kenichi Ayukawa, CEO, Maruti Suzuki
From: Rupom Hazarika
Subject: Executive Summary: Maruti Suzuki Competitive Position Analysis
Industry Analysis
For many consecutive years, Maruti Suzuki India Limited has been the largest passenger car manufacturer and seller in India. [1][2] Recently, it has sold 1,729,826 passenger cars, which is around 51% market share of of the Indian passenger car market in 2019, while its nearest competitor Hyundai India could sold 545,243 passenger cars, which is 16% of the market share.[3] Thus, there is a large gap between the Maruti Suzuki and its competitor which made it as the dominant player in the Indian automobile industry. Maruti Suzuki specifically competes within the passenger vehicles segment in automobile industry. Its main competitors include several foreign as well as domestic manufacturing companies. It sits within various strategic groups encompassing commercial vehicles, off road vehicles, such as Mahindra & Mahindra is known for SUVs. However, Maruti Suzuki enjoys quite a sizable market share nearly half due to its scale and affordability, and long experience.
A Porter’s Five Forces analysis [Exhibit 2] further solidified this reasoning.
Automobile industry, especially in passenger car segment, is a very competitive sector in India with many reputed foreign brands like Toyota, Hyundai and strong domestic brands with legacy like Tata Motors, Mahindra & Mahindra. Though threat of entry is less as it requires huge capital investment and industry know-how, but with innovations like Electric car and AI powered self-driven car, the threat of new entrants like highly VC funded Start Ups can’t be ignored. Buyers have quite bargaining power as there are many competing manufacturers, but often it is passed by using strategy of product differentiation. Over all, the intensity of rivalry among competing brands is high as the switching cost for customer is very low.
Environmental Analysis: [Exhibit 1]
When we analyse the environment for automobile industry, of which Maruti Suzuki is a part, the demographic trend shows that India is a lucrative market where there is a strong emerging workforce joining each year in building India’s fast growing economy. Thus, the middle class is ever growing and their purchasing power too with increasing disposable income to spend with. With political will and economic support, the Make in India campaign launched by PM Narendra Modi is boosting India to develop as new manufacturing hub in Asia, thus creating more opportunities and privileges for the automobile manufacturing for the global companies too in India. The relaxation in FDIs in different sectors of the economy is creating a wide efficient window and confidence for both large direct and indirect investments.
But there are further challenges. Recently, several regulatory changes like environment safety regulations from BS IV to BS VI is forcing companies to close down early plants and set up new plants and equipments to meet the standard [5], thus creating pressuring in the balance sheet. Moreover, innovation pressure from electric vehicles and IoT(Internet of Things) are mounting on to adopt new technology, because of which the traditional car manufactures may lose their respective several competitive advantages in the fields.
Competitor Analysis and Positioning [Exhibit 3] [7]
Further analysis of competitive forces reveals that Maruti Suzuki is in the dominant position cherishing the majority of the market share. Its next competitor Hyundai India is giving a tough competition trying to capture market share of Maruti Suzuki. Maruti Suzuki had a history as central government as its shareholder, thus enjoyed its advantage in growing its company to this position of today. Though, government divested its stake, it still enjoys the early captured market share. The pricing strategy, affordability, its established wide distribution system, Japanese technology advantage and its legacy driven brand positioning among the customers makes it the largest passenger car selling and manufacturing company in India.
Firm Capability Analysis [Exhibit 4] [4]
As a company with all its core values is looking to be the first mover, fast, flexible, innovative, wide networking and partnership, and customer obsessed, Maruti Suzuki is on the right path and winning side today, with all its strong capabilities.
The company is also leading the automobile market because of its firm capability of an established Distribution system network, which is well aligned with local enthusiastic entrepreneurial talents having a better understanding of local markets and customers.
Addendum
Exhibit 1: Environmental Analysis: [5] [6]
Exhibit 2: Porter's Five Forces Analysis:
Exhibit 3: KEY COMPETITORS BY REVENUE (Sales): [3]
Exhibit 4: Capability Analysis [9] [10]
COMPANY CORE VALUES (as mentioned on the official website) [4]
1. CUSTOMER OBSESSION
2. FAST, FLEXIBLE & FIRST MOVER
3. INNOVATION AND CREATIVITY
4. NETWORKING AND PARTNERSHIP
5. OPENNESS AND LEARNING
References
[1] Company Annual Report 2019-20. Maruti Suzuki Offial Website. https://www.marutisuzuki.com/corporate/investors/company-reports
[2] Maruti Suzuki. Wikipedia. Retrieved August 18, 2020 from https://en.wikipedia.org/wiki/Maruti_Suzuki
[3] “Top gainers and losers in passenger vehicle segment in FY19”. Economic Times: ET Auto.com
https://auto.economictimes.indiatimes.com/news/passenger-vehicle/cars/top-gainers-and-losers-in-passenger-vehicle-segment-in-fy19/68780700
[4] Maruti Suzuki – Official Website. Retrieved August 18, 2020 from https://www.marutisuzuki.com/
[5] "BS VI: What it means for the auto industry". Forbes India
https://www.forbesindia.com/article/auto-special/bs-vi-what-it-means-for-the-auto-industry/58551/1
[6] "Demographics of India". Wikipedia. Retrieved August 18, 2020 from
https://en.wikipedia.org/wiki/Demographics_of_India
[7] "FY2020 car sales in India: An analysis". AUTOCAR India
https://www.autocarindia.com/car-news/slowdown-gives-indias-auto-industry-the-blues-in-fy2020-417121
[8] Mushtaq, Babar. “A Study on Impact of Sales on Financial Performance of Maruti Suzuki India Limited". ResearchGate. Retrieved August 19, 2020 from
https://www.researchgate.net/publication/276394788_A_Study_on_Impact_of_Sales_on_Financial_Performance_of_Maruti_Suzuki_India_Limited
[9] "Suzuki drives India’s car manufacturing story". BusinessLine - The Hindu https://www.thehindubusinessline.com/specials/auto-focus/suzuki-drives-indias-car-manufacturing-story/article9532545.ece
[10] Salwan, Prashant. “Creating Competitive Advantage: Maruti Suzuki India Ltd”. Retrieved August 20, 2020 from
https://www.thecasecentre.org/educators/products/view?id=153388
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Disclaimer: This is an independent report created by the author of this article on 21st August, 2020, and was submitted as a part of Assignment to a Coursera course by University of Virginia, Darden School of Business. For any use of the analysis report, the users are asked to perform required due diligence.
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