This is a case study on Competitive advantage of Maruti udyog Ltd. (Maruti Suzuki) which focuses on business level and generic business strategies. This study will be helpful to Management students to understand the concept of strategic and competitive advantage. In this ase study, India’s largest car manufacturer tries to formulate a combination of various business and generic strategies such as lower cost and business differentiation strategies.
Case study on Competitive Advantage of Maruti Udyog Ltd.
Maruti Udyog Ltd (MUL) is India’s largest car maker with more than 54 per cent share of the passenger car market, having cumulative sales of 6 million vehicles. It has ten products, with ten variants, catering to the mobility need of the passenger cars and utility vehicles customers ranging from the no-frills, entry-level competitively-priced Maruti 800 to the premium SX4. Customer groups in the Indian automobile industry are segmented on the basis of price. Technology for car manufacturing is fairly standardized and MUL sources it from Suzuki, its Japanese parent company. In recent years, Indian car manufacturers have had to undertake major technological upgradations to conform to the international emission norms codified as the Euro I and Euro II norms and the absorption of multipoint fuel injection technology.
The value chain in car manufacturing starts with the inbound logistics of steel coils as input, moving through the processes of blanking, pressing, welding, assembly and vehicle inspection. The value system of MUL in-dudes the ancillary units, vendors and suppliers mostly based in proximity to its manufacturing facilities at Gurgaon and Manesar, Haryana from whom it sources its components and parts. It also includes the after-sale service providers, who are dealers having service stations. MUL has an extensive distribution channel consisting of channel partners who own and manage over 400 sales outlets across 222 cities. The service network covers 1171 towns and cities, supported by 2421 authorized service outlets.
MUL positions itself as a provider of security, confidence, reassurance, value-for-money and good resale value. The customer benefits expected are of fuel efficiency, low maintenance costs and easy availability of genuine parts. The business strategies of MUL are a combination of lower cost and differentiation for different types of products.
The lower-cost strategy is followed by the usage of a reliable network of suppliers, efficient manufacturing, just-in-time inventory systems, extensive after-sale service support, realisation of economies of scale and stringent waste management and control. The competitive advantages for cost leadership flow from factors such as the economic size of operations, low initial investment, high level of indigenisation, fully depreciated manufacturing plants and high labour productivity.
The differentiation strategy is put into action by providing options to a customer by offering a car at each price point difference of Rs 25,000. This means that a car with a marginal price difference would be available to a customer looking for upgradation.
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M. Venkatesh & R. Povaiah, “Total Control”, A & M, May 31, 2000, pp. 32-38; S. Talatam, “Maruti Udyog Ltd.: Competing with cost advantage”, Spark Online Refereed Journal, October 2002, available at http://www.indiabschoo/s.cQmlstrategy_OO1.htm, Retrieved June 19, 2007; Company website at httpd/ www.marutiudyog.corni, Retrieved June 20, 2007.
Strategic Management and Business Policy, Third Edition, by Azhar Kazmi, Page No. 244, McGraw Hill Companies, New Delhi.
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Since its founding in 1983, Maruti Udyog Limited experienced few problems with its labourforce. TheIndian labourit hired readily accepted Japanese work culture and the modernmanufacturing process. In 1997, there was a change in ownership, and Maruti becamepredominantly government controlled. Shortly thereafter, conflict between theUnited FrontGovernmentand Suzuki started. Labour unrest started under management of Indian centralgovernment. In 2000, a major industrial relations issue began and employees of Maruti went onan indefinite strike, demanding among other things, major revisions to their wages, incentivesand pensions.Employees usedslowdownin October 2000, to press a revision to their incentive-linked pay. Inparallel, after elections and a new central government led byNDA alliance,India pursued adisinvestments policy. Along with many other government owned companies, the newadministration proposed to sell part of its stake in Maruti Suzuki in a public offering. Theworker's union opposed this sell-off plan on the grounds that the company will lose a majorbusiness advantage of being subsidised by the Government, and the union has better protectionwhile the company remains in control of the government.The standoff between the union and themanagement continued through 2001. The management refused union demands citing increasedcompetition and lower margins. The central government prevailed and privatized Maruti in 2002.Suzuki became the majority owner of Maruti Udyog Limited.
On 24 February 2010, Maruti Suzuki India announced recalling of 100,000 A-Star hatchbacks tofix a fuel leakage problem. the company will replace the gaskets for all 100,000 A-Star cars.Maruti Exports Limited is the subsidiary of Maruti Suzuki with its major focus on exports and itdoes not operate in the domestic Indian market. The first commercial consignment of 480 carswere sent toHungary.By sending a consignment of 571 cars to the same country Maruti Suzukicrossed the benchmark of 300,000 cars. Since its inception export was one of the aspectsgovernment was keen to encourage.s
Every political party expected Maruti Suzuki to earnforeign currency. Angola, Benin, Djibouti, Ethiopia, Europe, Kenya, Morocco, Nepal, Sri Lanka,Uganda, Chile, Guatemala, Costa Rica and El Salvador are some of the markets served by MarutiExports.The Brand Trust Reportpublished by Trust Research Advisory has ranked Maruti Suzuki in theseventh position in 2011 and the sixth position in 2012 among the brands researched in India.Bluebytes Newsa news research agency, rated Maruti Suzuki as India's Most Reputed Car