Introduction To The Maruti Suzuki India Limited Commerce Essay

Maruti Suzuki India Limited (Formally known as Maruti Udyog Ltd) was established in 1981, February 24th. It was organized as a legal corporation beneath the provision of the Indian Companies ACT, 1956 to converge the rising demand of personal transportation by the lack of an efficient public transport system. It is the largest car manufacturing company in India accruing over 50% domestic car market. Suzuki Motor Corporation is the largest manufacture of mini passenger vehicles in Japan. According to Automotive Intelligence, Suzuki is eleventh largest vehicle manufacturing company in the world and fourth in Japan in terms of worldwide sales. The company offered different range of cars from passenger cars to sports cars. From 1982, Maruti Udyog was a subsidiary of Suzuki Motor Corporation of Japan. They licensed and joint venture agreement had been made between two companies on October, 2 1982. 1

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Maruti was also involved in various businesses like manufacturing, sales and purchasing of motor vehicles and parts of automobiles. Other activities of Maruti were facilitation of pre-owned car sales, fleet management and car financing. They have seven subsidiary companies in India are Insurance Business Agency Ltd, Maruti Insurance Distribution Services Ltd, Maruti Insurance agency Solution Ltd, Maruti Insurance Agency Network Ltd, Maruti Insurance Agency services Ltd, Maruti Insurance Agency Logistics Ltd.2 all these were affianced with promotion and selling motor insurance policies to motorcycle owners and the seventh one True Value Solution Ltd were in business of sales of certified pre-owned motorcycles under the brand ‘Maruti True Value’. They have four manufacturing units in different areas in Haryana state.3

The first commercial car from the joint venture company was launched in 1983 called Maruti 800 which was very popular. In 1984 they launched Maruti Omni which fits one full size family. In 1985 they introduced Maruti Suzuki Gypsy. In 1997 company exposed to foreign market and imported 500 cars to Hungary. In 1990 they launched three box cars with 1000cc engine; this was the major transformation in the company. In 1992 Suzuki Motor Corporation increased its share value to 50% in Maruti. Later year they launched with Maruti Zen and in 1994 they introduced Maruti Esteem into the market.4

Maruti has inaugurated its second plant in 1995. In 1997, Maruti started Maruti Service Master as model workshop to take care of its sales in India. In 2002, Suzuki Motor Corporation increased the share in Maruti to 54.2%. By 2002 they established 10 finance companies in which 8 of them were finance companies and two were joint ventures. They started a new business strategy for its purchase, sales and trade of old cards is Maruti True Value. With the first worlds strategic model with the help of Suzuki Motor Corporation they launched ‘the SWIFT’ in 2005.5

Maruti started working on new car plant and the diesel engine facility at Manesar plant, Haryana in 2006-07. They opened a new institute of Driving Training and Research (IDTR) in 2006 is a mutual project with Delhi Government for better Research in the field of automobile. They introduced diesel cars like Swift and SX4 luxury sedam in 2007. Maruti launched Multi Utility Vehicle (MUV) called Grand Vitara stylish, muscular and 5 setter car in 2007. Formerly they changed their name from Maturi Udyog Ltd to Maruti Suzuki India Ltd in 2007. After this they made an joint venture agreement with Magneti Marelli Powertrain SpA, both turned into Magneti Marelli Powertrain India Pvt Ltd and they were manufacturing Electric Control Units for cars. They also went into other joint venture agreement with Futaba Industrial Co Ltd and formed FMI Automotive Compoments Ltd for manufacturing Exhaust System Components. In 2008-09, they introduced a new A2 segment car, A-star in India and in Europe as new alto. They also raised their production capacity to 1million cars. In 2008, they launched a dual fuel called Maruti 800 Duo which runs on Liquefied petroleum gas (LPG) as well as petrol. 6

Report submitted by commission of government in 1982 discloses among the major goals with maruti is to modernization of the Indian automobile industry, Fuel efficient vehicles production, to manufacture huge number of vehicles, gain from foreign technology, and the production of ‘people’s car’ was suitable for Indian people and the climatic conditions which creates possibility of earning foreign exchange by exporting Maruti products and improving employment by starting new industries in the market. By improving the research in the market is determined by manufacturing of better cars would be in demand in Indian market. The main aim of the Maruti Suzuki production is to take help from Japanese company in its working model, working culture and in Indian industry they mainly focus on hierarchical discrimination, inadequate labor, low labor involved, and labor conflict and low recognition with the company. 7

Maruti Suzuki has created history in automobile industry through going keen on production record in 13 months. It is top number of car manufacturer in Asia, outside Japan and

Korea having manufactured about 5 million vehicles by may 2005. It also should a remark as most booming automobile company as joint venture and they keep on making profits since inception till 2000-01. Maturi also produced in service profits on an income of Rs 92.5 billion high reduction on new products that have launched resulted in a book loss. 8

Maruti’s profit increase to 98% rise in its economic second quarter net profits and they are planning to invest $32.3 million. It is going to improve the Gurgaon factory to northern state of Haryana increasing the facilities to improve 79,000 cars in year. They are trying to modernize its factory to produce cars faster. As the quarterly profit is benefited there is a huge demand from local market as well as international market. 9

Enterprise Architecture issues:

Implementation of PLM.

Lack of Information Technology.

Reinforcing management control.

Maruti Implemented Turnaround Strategy.

Pricing Strategy followed by Maruti.

Maruti care for Customers.

Maruti commit to Motorizing India.

Relationship with the suppliers and management.

Different revenue streams.

Importance of Vehicle Maintenance Service Market.

Implementation of PLM:

Maruti’s product development aims are, necessitate for short cycle times is necessary all times for the company to be at top position. Maruti’s management desires to launch new models as earlier as possible and try to decrease the time required for small modifications and expansion of different products. Another aim is to co-development. Main goal of Maruti is to get closer through global team and supplies to come up with new products and stand in the market. Other aim is to reform the method of vehicle localization and improvising quality and reliability. All these aims piercing straight to implement Product lifecycle management (PLM) answer with capabilities for information management, knowledge capture, process management and supporting for global collaboration.10 PLM solution will directly verbalize to Maruti’s business challenges.

Information management potential to solve the issues of different platforms, local variants and export destinations.

Process management allows simultaneous improvement and quicker change management and offers a platform for other process improvements to process faster.

Knowledge capture improves innovation and at the same time condenses prices by growing part re-use.11

Maruti implemented UGS PLM software as “UGS leverages the business value by offering a comple PLM solution” according to C. V. Raman, General manager, Engineering Division, Maruti Udyog Ltd. PLM execution consists of Teamcenter, NX and Tecnomatix software. Teamcenter offers broad range of practicality for release management which includes statements of material management and change management. NX maintains vehicle design which provides advance tools for styling, product design and digital mockup. System based modeling solution of NX make simpler for creating product variants. It is also used for tool design and the development of machining programs. Tecnomatrix software computerizes develops process planning. Maruti has won the Asia Pacific PLM excellence Award for 2006 by UGS Corp, which is a company for providing worldwide provider of product lifecycle management (PLM) software and solutions.12

Implementation of oracle application in HR department:

Workforce of maruti has grown quickly and expanded to 5,000 workers all over the India. Maruti rapidly discovered that by incompatible systems to manage human resources is insufficient. They needed a system that runs and maintains their employee details. Executing Oracle Human Resources in the company reported improved its HR functions as recruitment, compensation management, leave management, payroll, competency assessments and staff development. Each employee particulars are accumulated at a solitary database and from where HR department staff can access from the database for complete personal and history of the employees. For example, if a new position is opened they can search the database and find the best match for the opened position. It also helps to find the employee skill levels and training programs for better service and to have better knowledge.13

Maruti organized Oracle Self-Service HR to free HR staff as of basic duties are changing staff address details and to answer doubts regarding payment details and leave entitlements. HR module is either necessary or compulsory requirement for implementing financials of the company, supply chain, CRM or logistics module. Greater part of oracle applications implementations around the globe doesn’t have complete HR implementation than functional areas. Increase in the workforce excellence in last year’s the complete HR implementations are on the rise. There is a huge difference between implementation of complete Oracle HR applications and implementing other non-HR application is different with other modules. Implementing complete HT potentially might require many changes to the core HR setup compared to implementing non-HR applications. The analysis and implementation would impact areas befor planning complete HR implementation in the above applications. Oracle HR applications helps employees to update their details and apply for holiday break, checking their payrolls using the system. HR staff liked the Oracle application because it was focused on performance assessment and staff development.14

Lack of Information Technology:

There was no ERP vendor that supports the system in India until they decided to automate their operations until 1990. Lack of information technology effect the company a lot as technology is the major issue for any company development. Maruti considered the relative quality of producing vehicles on a random, daily basis through a quality. To improve the quality of the products they introduced different measures like talking with customers and taking surveys and understand the customer problems and solve them. They planned for long term goals for implementing and giving out the best quality to the customers and study their problems and keep on challenging targets for the company. Maruti decided to build the ERP system by itself with a group of 45 qualified engineers and taking help of Oracle consultants and developed different applications are receipts, production, inventory management, sales, invoicing, financial accounting and payrolls. Applications were developed and upgrading was done internally and maintenance and administration part was given outsourcing.15

Maruti was successful with implementing Oracle implementation commencement of deploying oracle database and oracle real application cluster as a stable foundation for its nationwide dealer management system. Oracle E-business helps the company to improve its applications and faster process in production of the precuts helps in oracle implementations, application support outsourcing, customization & enhancements, upgrades & migrations, DBA support and testing services. Core HR modules will definitely help employees and use other HR functions as a part of installation. Dealer management system is developed by oracle fusion middleware products. Selecting the ERP system in maruti was chosen by oracle because of its excellent performance. They used to work with external companies to maintain and develop oracle solution. Later they decided to work with the vendors to organize and maintain the ERP system.16

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Reinforcing management control:

The growing business of Maruti in India in another way proved it to be a tough task to manage, with their existing strategy. The policies they utilized were not scalable with the growing business and they had to look for more reliable options. Main problem with using multiple systems and manage finances with lack of control over processing and information quality in the company. Each company follows different workflows and each division in the company will have different procedures for implementing the workflow. They have different data formats which require consolidation and preventing real time access to the company profile of sales and critical statistics. With the help of oracle application maruti regulated single financial management platform. Maruti took control over accounts payable and accounts revenue and gained complete and assisted in the management of all financial information. The tasks like generating reports for management review proved tedious with employees who had to do this manually. Also their system was designed to use inputs that were similar but did not possess ability to co-ordinate with the other entities, resulting in a redundancy in tasks being performed.17

For Instance when new business units open up and the company needs to make sure their productivity is not affected and the servers need to be managed manually in order to make sure everything is going as expected. This would definitely involve either a change in system, that is more scalable with the growing business and reduce the manual intervention in to the maintenance task. Otherwise it’s a way of revising their ways of managing.18

Oracle fitted the slot in an appropriate way, which replaced the till then products used by Maruti. Most of them being internal were not a best option, keeping the current business scenario in view as they lacked co-ordination among them and manual intervention was imminent. Maruti wanted this change to be as smooth as possible and hence played the responsibility with Oracle itself which had a specialized consulting domain. The joint decision was made by oracle considering the requirements of Maruti. The decision was focused on the key factors like design; deploy the software involved in the revision of the technology and also the co-ordination of the teams participating in the task. The after transformation support was also a prime factor to consider during the plan was being designed.19

Maruti Implemented Turnaround Strategy:

Maruti was the leading automobile company till 1998, having about 84% of the market share. With the rise in competition from local automobile companies like Hindustan Motors, Telco, Mahindra & Mahindra and international automobile companies like Daewoo, Toyota, Ford, PAL, GM, Mitsubishi has changed the structure of whole automobile industry in India from the past seven years and led to decrease in profits and market share for Maruti. The organization learning of Maruti was moderately successful; the cost was relatively inexpensive as Maruti had its strong Japanese practices to fall back upon. With the program of organizational redesign, rationalization of cost and enhanced productivity, Maruti bounced back to competition with 50.8% market share and 40% rise in profit. At the same time investment in automobile sector by foreign car manufacturers was allowed by the Indian government and hold majority stakes.20

With the loss of market share and decline in profits, Maruti pioneered strategic acts to redesign itself to face the competition in the Indian market and also to deal with the India’s liberalization process. During its redesign process Maruti consulted AT Kearney & McKinsey which are the consultancy firms, and also an OD consultant Dr.Athreya who is internationally reputed for the development of organization and modes of strategy.21 In its redesign process, the strategies followed are: to launch a new model every year satisfying different segments of the market, to decrease cost of production by accomplishing 85-90% indigenization for new models, increasing the dealer network from 150 to 300 focusing on bulk sales to attain its market share back, to reduce number of vendors and introduce competitive bidding. The mission statement of the organization is to come up with new models like fuel efficient vehicle with latest technology. Leader in domestic market and be among global players in the overseas market. Creating customer delight and shareholders wealth. With the redesign process the total production capacity increased to over 3, 70, 000 vehicles per year with the investment of around Rs. 4000 mn for the expansion project. Along with its redesign process, there has been a change in business focus of Maruti. The business focus of Maruti previously when it controlled the largest market share was to “sell what we produce”. After it began redesign process business focus of whole organization had a shift from production, production and production to “marketing and customer focus”. 22

Pricing Strategy followed by Maruti:

Maruti has a product offering to all segments at all price levels. It offers a car with the price of Rs.1, 87,000.00 which is the lowest offer on road. The repeat buyers who already owned a Maruti car makes its 70% of business. Completion in the Indian passenger car industry is increasing and price emerged as an important factor affecting the purchasing decisions for customer. Maruti has been in the industry for more than two decades hence as a market lease maruti adopted aggressive pricing strategy.23 Maruti focused on promoting and distribution the products in the high competitive market. Maruti classified different innovative promotional strategies. They came up with some interest rates declining from 12% to as low as 8% in automobile finance. Maruti finances a mjor toll to drive up its car sales. For every customer looking for up gradation in his car their pricing strategy provides an option. Their motive of having different product offering is by considering every set of car customers in India. The following is how every price point is covered.24

Maruti care for Customers:

Maruti has successfully incorporated customer-friendly approach in its organization culture by getting rid of public-sector laid back image which made it to win five consecutive J D Power CSI Awards proving that its primary focus is on customer satisfaction. Employees also incorporated customer centric attitude following the organization culture. For each customer complain Maruti dealers and employees are responsible. Based on customer feedback there are cases of cancelling dealerships.25

Maruti has started a number of plans in purpose of well customer service. They have even changed their interior of showroom allowing customers to walk minimum in the showroom and there are schedules for customer service times and delivery of vehicles. The Dealer Sales Executive, who is trained on greeting notes, is the first person to interact with the customer of Maruti when he walks into the Maruti showroom. Under CRM department Maruti has a cell to handle customer complaints. Another effort by Maruti is the call center where Maruti can closely interact with its customer. The Market Research department of Maruti studies varying consumer behavior and needs of market. Maruti’s claim of being customer friendly further strengthens because of seventy percent of repeat buyers. There is a lot of investment and effort involved in developing customer loyalty schemes.26

Maruti commit to Motorizing India:

Maruti is now putting efforts in making Indian consumers to switch from two-wheelers to the car without any tedious effort by the consumers thus showing its commitment of motorizing India. The outcome of this effort is in making small town people to buy Maruti cars for Rs. 2599 scheme because of its association with State Bank of India and its Associate Banks and organized finance plans.27

The compact cars, which currently make up 80% of the market is the root of growth for Maruti in the future. Strong economic growth, affordable finance, up gradation in infrastructure, proper framework favors the growth of car customers. The rise in income levels and low penetration levels at 7 per thousand are the favourable things for development automobile industry. Maruti while researching found that rural people had strange opinions in having a car that EMI (Equated monthly installments) ranges between Rs 4,000 and Rs 5,000 and along with it for the car maintenance it would be Rs 1,500-2,000 per month, plus another Rs 1,000 for fuel. Taking their inputs Maruti started working in developing an innovative idea to counter their apprehension. Controlling the fuel bill is in consumer hands where maintenance need not be. Khattar says “What the company is doing now is saying how much you spend on fuel is in your hands anyway. As far as the maintenance cost is concerned, if you want it that way, we will charge a little extra in the EMI and offer free maintenance.” Thus Maruti laid another innovation in the automobile industry.28

Relationship with the suppliers and management

Maruti’s top level direction of purchasing organization began development of a corporate wide Supply Management Strategy. The goal of Supply Management Strategy is to ensure that Maruti to provide with the right product, at the right time, with the best quality, for the lowest possible price. He elaborated the difference between the vendor and suppliers. A Vendor is going to provide a product which is already made and that doesn’t include any creativity or innovation. Supplier is an opportunity to extend their business within the organizations that brings the new product with innovation and creativity as required for the developing to meet certain requirements to the product development.29

Supply management strategy goal is to shift the organization from a short-term transaction mentality to a long-term focus on supplier relationship. Position of suppliers with production facilities and there integration into Maruti’s development process was an important part of long-term relationship development. The long-term transaction would not only achieve by purchasing but also to develop new products for the development. Maruti recognized that engineering and manufacturing plays equal role in achieving the vision of a new role for supply management. Top level management argued that a slow and steady approach was necessary to build the enthusiasm and engagement in supply management system. He also thought that this new ways would bring us new technology improvements and involve good strategic thinking to bring the thing perfect at the first time.30

Different revenue streams:

Maruti has successfully developed different financial strategies without making huge investments in the form of MDS, N2N, Maruti Insurance and Maruti Finance. These facilitate in providing the customers a hassle free experience and in turn satisfying the customers.31

Maruti Finance: In a market where car sales of more than 80% are financed, Maruti has successfully entered and created a financial strategy for Maruti. This strategy has become a crucial factor in converting a Maruti car sale in certain cases. Finance plays a key role in making decisions for car purchase. Maruti has grouped up with 8 other finance companies to form a consortium. The eight other companies are Citicorp Maruti, Maruti Countrywide, ICICI Bank, HDFC Bank, Kotak Mahindra, Sundaram Finance, Bank of Punjab and IndusInd Bank Ltd. (previously-Ashok Leyland Finance).32

Maruti Insurance: The major concern of car owners is the insurance. Maruti has gathered all car insurance needs under one roof. Maruti has grouped up with National Insurance Company, Bajaj Allianz, New India Assurance and Royal Sundaram to make this service available for its customers. From finding out the most suitable car insurance policy and assisting in claiming insurance hassle-free it’s the complete responsibility of the dealer. Maruti Insurance makes its service easily available for customers at any Maruti dealer workshop in India to have their cars repaired and processing of insurance claims.33

True Value – Initiative to capture used car market: Maruti’s another important development is its entry into the market of used cars in 2001, allowing customers to exchange their old car with the new one by bringing their vehicle to ‘Maruti True Value’ outlets and paying the difference with loyal discounts. This helps in building satisfaction and retaining the customers. With Maruti True Value, it filled this gap in making customer trust in Indian used car market. In this highly unorganized and deceptive market where biggest concern in making a car sale is trust, Maruti could achieve this based upon its strength in Indian market. Maruti has developed a system where dealers pick up used cars, improve the condition, issue a new warranty and sell them again. Dealers make all investments for True Value. Maruti has established 172 showrooms across the nation building up a strong network. The used car market is 2-3 times as large as new car market in developed markets having a huge potential in India.34

N2N: Maintenance of car consumes loads of time, especially if you own a group of automobiles. N2N Fleet Management Solutions by Maruti for companies takes the responsibility of A-Z automobile problems. Services comprise complete solutions across life of the vehicle like Leasing, Maintenance, Convenience services and Remarketing.35

Maruti Driving School (MDS): Maruti has started this in order to achieve the market where there is suppression in buying cars due to lack in car driving skills. This strategy brings such customer to the showroom and potentially learns car driving.36

Importance of Vehicle Maintenance Service Market.

In the old days, the company’s operations could be boiled down to a simple three-box flowchart. Components came from the ‘vendors’ to the ‘factory’ where they were assembled and then sent out to the ‘dealers’. In this scheme, you know where the company’s revenues come from. The new scheme is more complicated. It revolves around the total lifetime value of a car. Work on this began in 1999, when a MUL team, wondering about new revenue streams, traveled across the world. Says R.S. Kalsi, general manager (new business), MUL: “While car companies were moving from products to services, trying to capture more of the total lifetime value of a car, MUL was just making and selling cars.” If a buyer spends Rs 100 on a car during its entire life, one-third of that is spent on its purchase. Another third went into fuel. And the final third went into maintenance. Earlier, Maruti was getting only the first one-third of the overall stream.37

As the Indian market matured, customers began to change cars faster. Says Kalsi: “So the question was, if a car is going to see three users in, say, a life span of 10 years, So Maruti has changed gears to take a big share of this final one-third spent on maintenance. Maintenance market has a huge market potential. Even after having fifty lakh vehicles on road Maruti is only catering to approximately 20000 vehicles through its service stations every day.38

For this they are conducting free service workshops to encourage consumers to come to their service stations. Maruti has increased its authorized service stations to 1567 across 1036 cities. Every regional office is having a separate services and maintenance department which look after the growth of this revenue stream. 39

Conclusion

Maruti’s vision statement is, its goals consist of continue leadership in the Indian automobile industry, enlarging the shareholders, establish customer pleasure. Maruti has highest level of customer satisfaction consistence for six years according to the J.D. Power Asia Pacific 2005 India Customer Satisfaction Index (CSI) study. They gave importance for the customers and started many projects for better service. Maruti was ranked top in Indian sales satisfaction study. Maruti Suzuki has a sales network of 307 state-of -the-art showrooms across 189 cities, with a workforce of over 6000 trained sales personnel to guide MUL customers in finding the right car.

Maruti Suzuki scored the highest across all 7 parameters: least problems experienced with vehicle serviced, highest service quality, best in-service experience, best service delivery, best service advisor experience, most user-friendly service and best service initiation experience. 92% of Maruti Suzuki owners feel that work gets done right the first time during service. The J.D. Power CSI study 2004 also reveals that 97% of Maruti Suzuki owners would probably recommend the same make of vehicle, while 90% owners would probably repurchase the same make of vehicle. At Maruti Suzuki, customers will find all car related needs met under one roof. Whether it is easy finance, insurance, fleet management services, exchange- Maruti Suzuki is set to provide a single-window solution for all car related needs.

The acquisition cost is unfortunately not the only cost customers face when buying a car. Although a car may be affordable to buy, it may not necessarily be affordable to maintain, as some of its regularly used spare parts may be priced quite steeply. Not so in the case of a Maruti Suzuki. It is in the economy segment that the affordability of spares is most competitive, and it is here where Maruti Suzuki shines. The highest satisfaction ratings with regard to cost of ownership among all models are all Maruti Suzuki vehicles: Zen, Wagon R, Esteem, Maruti 800, Alto and Omni. It has introduced the superior 16 * 4 Hypertech engines across the entire Maruti Suzuki range. This new technology harnesses the power of a brainy 16-bit computer to a fuel-efficient 4-valve engine to create optimum engine delivery. This means every Maruti Suzuki owner gets the ideal combination of power and performance from his car.

Maruti was also involved in various businesses like manufacturing, sales and purchasing of motor vehicles and parts of automobiles. Other activities of Maruti were facilitation of pre-owned car sales, fleet management and car financing. They have seven subsidiary companies in India are Insurance Business Agency Ltd, Maruti Insurance Distribution Services Ltd, Maruti Insurance agency Solution Ltd, Maruti Insurance Agency Network Ltd, Maruti Insurance Agency services Ltd, Maruti Insurance Agency Logistics Ltd. They also went into other joint venture agreement with Futaba Industrial Co Ltd and formed FMI Automotive Compoments Ltd for manufacturing Exhaust System Components.

Maruti’s profit increase to 98% rise in its economic second quarter net profits and they are planning to invest $32.3 million. Maruti Suzuki has created history in automobile industry through going keen on production record in 13 months. It is top number of car manufacturer in Asia, outside Japan and Korea having manufactured about 5 million vehicles by may 2005. It also should a remark as most booming automobile company as joint venture and they keep on making profits since inception till 2000-01. They are trying to modernize its factory to produce cars faster. As