troduction

Maruti Udyog Limited's (MUL) share of the Indian passenger vehicle market dropped to below 50% in 2004-05 (Refer to Exhibit I for the performance of the Indian passenger vehicle industry and MUL between April 2003 and March 2005). The future of MUL's low-cost model - the Maruti 800 (M-800) - was at stake due to the entry of global automakers into India. M-800 had dominated the Indian car market since it was launched in 1984. The introduction of new cars by competitors made the M-800 look obsolete as it had not been changed in any major way for over two decades. Apart from the increased competition, MUL also had a few other problems on its plate.
There was a delay in setting up of a plant in India for manufacturing diesel engines and transmission systems for cars. The engines for its diesel variants were imported from other countries, and there were limits on the quantities it could import. In the market, MUL's models like the Zen, Alto, WagonR, and Baleno were showing mixed results.

While Zen, Alto and WagonR were successful, Baleno failed to live up to MUL's expectations. Its utility vehicle 'Versa' met with a disastrous response from the Indian consumer. In addition, rising incomes, the growth in the used-car market, and availability of easier finance options, led customers to shift their

allegiance to other models from competitors. To reduce its excessive dependence on a single model (M-800), the company had restructured the strategy for the M-800, and planned for product upgrades and new product development. In tune with changing customer preferences, the company launched its hatch-back model, 'Swift' in May 2005, to compete with Hyundai3 Getz and Fiat4 Palio.

<< Previous

Introduction Contd...
MUL hoped this model would help the company shed its low-cost and simple look. The move expressed the company's intent to move up the value pyramid (by upgrading Alto-WagonR-Santro customers to the new model) while simultaneously increasing market penetration at the bottom of the value pyramid by making the M-800 more affordable.

Indian Automobile Industry

The Indian automobile industry has four major segments -- commercial vehicles (CVs), passenger vehicles, three wheelers, and two wheelers. The market share for each of these segments of the Indian automobile industry, for the year 2003-04, is shown in Figure I. According to the Society of Indian Automobile Manufacturers (SIAM) , the Indian passenger vehicle market has three categories -- passenger cars, multi-

purpose vehicles (MPVs), and utility vehicles (UVs).

The passenger car market is further divided into various segments based on the length of the car (Refer to Exhibit II for a detailed description of the lengthwise classification of passenger cars.

The Indian automobile industry was a highly protected slow-growth industry with very few players till the opening up of the Indian economy in 1991. Low manufacturing costs, availability of skilled labor, an organized component industry, and the capability to supply in large volumes attracted global auto majors to set up their operations in India after the opening up of the sector. For example, Fiat and DaimlerChrysler started outsourcing their component requirements to India. 100 percent Indian subsidiaries of global players, like Delphi Automotive Systems and Visteon , exported components to other parts of the world.
Macroeconomic factors like government regulations, low interest rates, and availability of retail finance played an important role in the rapid development of the automobile industry in India during the late nineties (Refer to Exhibit III for an understanding of the impact of the Union Budget on the Indian automobile industry over the years)...

Maruti Udyog Limited

MUL's M-800 was ideally suitable for Indian customers as it was reasonably priced, fuel efficient and was sleek and easy to drive when compared to the models then available. With the success of its M-800, MUL soon replaced Hindustan Motors as the leader in the passenger car market...

Government of India - Suzuki tussle In August 1997, there was a major difference of opinion between the GoI and

SMC regarding the appointment of the Managing Director (MD) for MUL. SMC did not support the appointment of R. S. S. L. N. Bhaskarudu (Bhaskarudu), holding that he was incompetent to hold the post... Decline in market share There was a gradual decline in the market share of MUL over the years from 1999 to 2004. This happened even though MUL had slashed prices of certain models on a couple of occasions...
Maruti Strikes Back
Launch of new variants and models Despite analysts predicting that the M-800, the bread and butter model of MUL, would be phased out, the company asserted that it would take necessary steps to maintain its leadership position. MUL had three compact car models -- Alto, WagonR, and Zen -- competing with Hyundai Santro, Tata Indica, and Fiat Palio...

Increasing dealer profitability During 2003 and 2004, MUL visualized and implemented a strategy for its dealers to increase their profitability levels in view of increased competition. According to the strategy, the 300-odd dealers of the company were asked to strengthen their manpower, increase the salaries of their sales agents, and offer them better incentives...

Promotional offers Faced with stiff competition and declining market shares, MUL focused its promotions strategy on targeting twowheeler owners...
'Change Your Life' campaign In 2003, MUL launched novel offers like "Change Your Life" campaign and also offered vehicle insurance 'for Rupee One only', to attract customers... Television campaigns In 2003, MUL came out with a toy car advertisement that became popular for its simplicity and straightforward message. The advertisement depicted a child playing with a toy car. When reprimanded by his father the child replies, 'Kya karoon papa petrol khatam hi nahin hota' (What should I do? The petrol never finishes)... '2599' offer In 2004, MUL introduced the '2599' offer under which a consumer could buy an M-800 by paying an EMI of Rs 2,599 only, for a period of seven years. The down payment was fixed at Rs 40,000. MUL entered into an agreement with the State Bank of India (SBI), the largest bank in India, to promote this scheme...

'Teacher Plus' scheme To further penetrate into the market, MUL continued to focus its efforts on the rural markets and specific target groups. In 2004, it introduced the 'Teacher plus' scheme, in a tie-up with SBI, aimed at teachers who were interested in buying a new car... Maruti 'True Value' There was a gradual decline in the market share of MUL over the years from 1999 to

2004. This happened even though MUL had slashed prices of certain models on a couple of occasions...
Conclusion
The company's change in strategy and emphasis on developing effective marketing communications began to yield results. In the J.D. Power Asia Pacific 2004 India APEAL study, WagonR and Zen were ranked first and third in the premium compact segment; Esteem was picked as the best entry level car in the mid-size category.

MUL also topped the J.D. Power Asia Pacific 2005 India Sales Satisfaction Index in terms of customer satisfaction with the new vehicle sales process. As per the J.D. Power Asia Pacific 2005 India Customer Satisfaction study , MUL ranked highest in customer satisfaction with after-sales service for the sixth consecutive year. "Maruti's consistent performance in the study over the past several years has resulted in a steady increase in the percentage of its customers who say they intend to remain loyal to the brand," said Mohit Arora, India director, J.D. Power Asia Pacific...
Exhibits
Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit I: Performance of Passenger Vehicle Industry and MUL: April 2003 to March 2005 II: Classification of Passenger Cars* III: Impact of the Union Budget on the Indian Automobile Industry IV: Buying Behavior of Indian Car Buyers V: MUL's Major Competitors in India VI: The Discount Phenomenon

Exhibit VII: Price List of MUL's Car Models Exhibit VIII: Milestones at MUL