W15582
\nMARUTI SUZUKI INDIA: DEFENDING MARKET LEADERSHIP IN THE
\nA-SEGMENT
\nJaydeep Mukherjee, Gaurav Mathur and Nikhil Dhar wrote this case solely to provide material for class discussion. The authors do
\nnot intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain
\nnames and other identifying information to protect confidentiality.
\nThis publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the
\npermission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
\norganization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western
\nUniversity, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com.
\nCopyright \u00a9 2015, Richard Ivey School of Business Foundation Version: 2015-12-17
\nMaruti Suzuki India Ltd. (MSIL), a subsidiary of Suzuki Motor Corporation Japan, had dominated the Indian
\nautomotive industry with an unchallenged leadership position in the \u201cA-segment\u201d since its inception in 1983. The
\nIndian car market was normally divided into four product categories: hatch, sedan, sport utility vehicle (SUV)\/multiutility vehicle (MUV) and van. The hatch segment could be further divided into entry-hatch, mid-size-hatch and
\npremium-hatch segments. The overall hatch segment was known as the A-segment (see Exhibit 1). Growth of the
\nIndian car market was driven primarily by growth in this segment.
\nFrom 2008 to 2013, MSIL\u2019s competition had made inroads in the A-segment with cars like the Hyundai Eon, the
\nHyundai i10, the Tata Nano, the General Motors Beat and the Honda Brio. During this period, MSIL\u2019s A-segment
\nmarket share declined from 61 per cent to 49 per cent. Industry sources estimated that the Indian car market would
\ngrow to annual sales of 4.7 million units \u2014 and the A-segment to 2.4 million units \u2014 by 2017\/18. A continued drop
\nin market share in the A-segment could jeopardize MSIL\u2019s competitive advantage in the Indian car market. The
\ncompany needed to reassess its strategy to sustain its market position (see Exhibit 2).
\nAmong other initiatives planned in March 2013, the MSIL board had sought a product roadmap to sustain its
\ndominance in the A-segment. Typically, new product development and introduction required four to five years to
\ndesign, develop, test and produce with a budgeted spend of approximately \u20b96 billion,1
\napart from associated
\nopportunity costs; hence, it was an important activity for MSIL. The general manager of the product planning
\ndepartment was entrusted with the assignment.
\nTHE INDIAN CAR MARKET
\nIndia\u2019s total passenger vehicle industry (including passenger cars and commercial vehicles) was the sixth largest in
\nthe world, with annual production of more than 3.9 million units in 2011, while the country\u2019s passenger car market
\nwas the seventh largest in the world, with sales of almost 2.7 million units in 2011. As a car manufacturer, India was
\ngrowing at an exceptional speed; in 2003, for the first time, national production exceeded the 1 million mark, going
\non to exceed the 2 million mark in 2006.2<\/p>\n
1
\nAll figures are in \u20b9 (INR or Indian rupee) unless stated otherwise; \u20b91 = US$0.02 on May 5, 2015. 2
\nSociety of Indian Automotive Manufacturers, \u201cIndustry Performance in 2014-15,\u201d www.siamindia.com\/statistics.aspx?
\nmpgid=8&pgidtrail=9, accessed July 30, 2015.
\nThis document is authorized for use only by Chellyn Jones in QSO-500-X2223 Business Research 20TW2 at Southern New Hampshire University, 2021.
\nPage 2 9B15A016
\nMSIL utilized the findings of several macroeconomic studies to draw up its future plans. It also had a research wing
\nthat provided information to its planning, marketing and legal departments. Apart from that, it initiated its own
\nresearch related to competition, dealership health, sales figures and market potential as well as consumer insights.
\nReports indicated a significant opportunity in the Indian passenger car market, in the form of growing gross
\ndomestic product (GDP), increasing income (i.e., more disposable income among consumers), increasing bank
\nnetworks and credit facilities, and low car penetration (18 car owners per 1,000 people, whereas Brazil and China
\nhad figures of around 200 per 1,000). Major global players like General Motors, Ford and Toyota had initially
\noffered only sedan cars and SUVs, but had eventually introduced products in the A-segment \u2014 typically, the most
\ncompact cars from their international portfolios. Most of these compact cars were in the premium-hatch category of
\nthe Indian market. Thus, the sedan, SUV and premium-hatch segments witnessed higher competition. These
\nsegments were also supported with some high-profile advertisements and consumer promotions from the car
\nmanufacturers, which fuelled growth.
\nAs a consequence, the entire A-segment also became very competitive for well entrenched players like MSIL,
\nHyundai and Tata Motors. Stakes for the entry- and mid-hatch segments also increased among these competitors.
\nCompetition was expected to intensify with more multinational companies entering the Indian market, in addition to
\nexisting players introducing India-specific products (targeting the entry- and mid-hatch segment) (see Exhibit 3).
\nThe Indian market saw increased proliferation of features from the luxury segment becoming available in the lowerend car segments. Features such as air conditioning, power steering and power windows were aspirational for the
\nhatch segment in 2009, but became standard features in the hatch models by 2012\/13. Similarly, features available in
\nthe luxury sedan segment during 2008, such as touch-screen audio, electric- and auto-foldable mirrors, and
\nautomatic air conditioning, were standard across the sedan segment in 2012\/13.
\nThe used car market in India grew at a compound annual growth rate (CAGR) of 22 per cent from a volume of 1
\nmillion units to 2.6 million units from 2007 to 2012. The market was projected to grow at a rate of 22 to 24 per cent
\nfrom 2012 to 2017. Within the used car market, small cars accounted for 67 per cent of the total sales in 2011\/12.
\nThe ratio of new car sales to used car sales in India was expected to reach 1:1.8 by 2016\/17 (from 1:1.3 in 2011\/12).
\nHowever, even with this increase, India\u2019s ratio would be low compared to developed markets, where the ratio was
\n1:3.
\nCOMPANY BACKGROUND
\nMSIL, formerly known as Maruti Udyog Limited, started operations in 1983, when the Government of India and
\nSuzuki Motor Corporation established a joint venture company to sell small cars in India. Suzuki increased its equity
\nfrom 26 per cent to 40 per cent in 1987, and further, to 50 per cent in 1992, and 56.21 per cent in 2012 (the
\nremainder was owned by public and financial institutions). The company was listed on the Bombay Stock Exchange
\nand the National Stock Exchange of India.
\nMSIL\u2019s vision statement was: \u201cThe leader in the Indian automobile industry. Creating customer delight and
\nshareholders\u2019 wealth: A pride of India.\u201d Its core values were \u201ccustomer obsession, fast, flexible and first mover,
\ninnovation and creativity, networking and partnership, and openness and learning.\u201d
\nBy 2013, the company had established a strong brand image by offering solid, reliable products. MSIL\u2019s corporate
\ncommunications emphasized emotional connection, using the message, \u201cIndia comes home in a Maruti Suzuki.\u201d
\nMSIL products enjoyed a sturdy, reliable and economical image in the minds of consumers, and A-segment
\nconsumers were proud to own a Maruti Suzuki car. The company\u2019s market share reached 85 per cent in 1997, before
\ngradually reducing due to intense competition. By February 2012, the company had sold 10 million vehicles in
\nIndia. In addition, it was ranked number one in consumer satisfaction for an unprecedented 13th time in a row in the
\nJ.D. Power India customer satisfaction index in 2012.3<\/p>\n
3
\nJ. D. Power, 2012, \u201cCustomer Expectations of Convenience during Vehicle Service Rises Significantly in India,\u201d
\nhttp:\/\/india.jdpower.com\/press-releases\/2012-india-customer-service-index-csi-study, accessed November 17, 2015.
\nThis document is authorized for use only by Chellyn Jones in QSO-500-X2223 Business Research 20TW2 at Southern New Hampshire University, 2021.
\nPage 3 9B15A016
\nIndian consumers generally spent two times the cost of acquisition on repairs and maintenance over the lifecycle of
\na car, as per the research conducted by MSIL. MSIL products had lower overall costs of ownership. This was
\nachieved by reducing product cost through localization, value analysis and value engineering (VAVE), and
\nimproved quality. The company had developed ancillary industries in and around its factory, indigenized the
\nnecessary components and increased the local content in its products.
\nIn 2012\/13, MSIL achieved revenue of \u20b9426 billion and a profit of \u20b923.9 billion. The company had two state-of-theart factories. In 2010, it rolled out 1 million vehicles in a year, which was a remarkable landmark for an automobile
\ncompany in India.
\nThe depth of MSIL\u2019s distribution channels played a key role in helping the company to maintain its leadership
\nposition in the Indian passenger car industry. By the end of 2012, it had a sales network spread across 878 cities
\nnationwide and a service network spanning 1,422 cities and towns. However, establishing and maintaining
\ndistribution outlets in rural markets remained a key challenge for MSIL. Initiatives to maintain constant dealership
\nmotivation \u2014 through hefty trade promotions, attractive foreign trips and corporate recognition for smaller
\ndealerships \u2014 were crucial to success. MSIL dealerships were confident of brand pull, good sales and service
\nsupport, and fair dealings. Dealerships located in cities that were not in the top 50 cities of India (in terms of car
\nsales) took great pride in being part of the Maruti Suzuki family and this association gave them greater recognition
\nin their own business and social circles.
\nCOMPETITION
\nWith its aggressive tactics, broad product range, appropriate price points, attractive promotions and wide
\ndistribution, Hyundai was MSIL\u2019s greatest competitor in the A-segment. Its product range comprised the Eon, the
\ni10 and the i20, which were designed to cater to the changing requirements of Indian consumers. Hyundai had the
\nadded advantage over MSIL of having successful products like the Verna in the premium car segment, which helped
\nin building brand image and improving profit potential.
\nTata Motors posed a different type of competition to MSIL. The brand was trusted across different consumer
\nproducts and had good presence in the transport vehicle segment. Most A-segment consumers had travelled in Tata
\nbuses and experienced the sturdiness and ubiquity of the company\u2019s vehicles. Tata entered the hatch market with the
\nIndica, which was an indigenously developed car and hence, had an emotional connection with many consumers.
\nThe product was a success in the hatch segment and it catered to personal and commercial segments. With its
\nspacious interiors, sturdy structure and relatively cheap operating costs, the Indica was a preferred product for both
\nshort- and long-distance travel. The vehicle was very popular in the taxi segment, as well as with consumers who
\nused it for their own businesses.
\nThe Nano was Tata\u2019s most innovative product and had enjoyed a high-profile launch. It was conceptualized as a
\nproduct that bridged the gap between two-wheeled vehicles and the entry-level A-segment car. It was expected to be
\na game changer in that it was completely designed in India using the frugal engineering4
\nmethodology to provide an
\naffordable alternative to two-wheeled vehicles, which constituted a huge market in India. Despite these selling
\npoints, the product was not as well accepted in the Indian market as was expected, which was reflected in the sales
\nfigures (see Exhibit 4).
\nHyundai and Tata Motors had plant capacities of 600,000 and 1.1 million vehicles, respectively. Hyundai designed
\nits vehicles in Korea and established a global image for its products. Tata motors had its design centres in India and
\nEurope. MSIL had its research and development centre in India, which was Suzuki Motor Corporation\u2019s main
\nresearch and development centre in Asia (apart from Japan). This gave MSIL an edge over its competitors, as it had<\/p>\n
4
\n\u201cThe central tenet behind every frugal engineering decision is maximizing value to the customer while minimizing
\nnonessential costs. The term frugal engineering was coined in 2006 by Renault chief executive Carlos Ghosn to describe
\nthe competency of Indian engineers in developing products like Tata Motors\u2019 Nano, the pint-sized, low-cost automobile.\u201d
\nPwC, \u201cThe Importance of Frugal Engineering,\u201d May 25, 2010, www.strategy-business.com\/article\/10201?gko=24674,
\naccessed July 8, 2015.
\nThis document is authorized for use only by Chellyn Jones in QSO-500-X2223 Business Research 20TW2 at Southern New Hampshire University, 2021.
\nPage 4 9B15A016
\naccess to Japanese technical support but the autonomy to design and develop new products in line with local
\nrequirements.
\nDEALER NETWORK
\nBuying a car was a high-involvement purchase that required quality selling. MSIL operated through an exclusive
\nnetwork of dealerships, which provided sales, service and spares. Every sale had the potential to start a regular
\nstream of revenue for the subsequent decade for the dealership and the car manufacturer. Sales and service support
\nwas critical for managing customer expectations, experiences and relations, apart from the initial sale.
\nCar dealerships relied intensely on infrastructure and working capital. Each required an investment of around \u20b985
\nmillion (in rural areas) to \u20b9175 million (in major cities, excluding the cost of land). With such large capital
\ninvestments and low margins in the small car segment, dealers were finding it increasingly difficult to break even,
\neven after two to three years of operations. For these reasons, dealerships were appointed only after assessing longterm commercial viability (see Exhibit 5).
\nSince the cars could be located in any part of the country and reliable service was a basic necessity (human life
\ncould be at risk in case of product malfunction), all car manufacturers had a large network of authorized service
\nstations to provide quality service. Sales and service channel development and maintenance were therefore major
\ncosts; hence, companies aligned their distribution strategies with their market realities and business strategies. MSIL
\nenjoyed high network penetration with 1,009 dealerships and 2,946 authorized service centres. Market intelligence
\ndata for MSIL showed that Hyundai had 340 dealerships and 935 authorized service centres, while comparable
\nfigures for Tata passenger cars were 217 and 874, respectively (though it enjoyed considerably greater reach and
\npresence in the commercial vehicle segment).
\nThe dealer margin on A-segment cars was shrinking in 2013. The Maruti sales team had been tracking the data from
\nthe dealerships across the country and found that this drop was more pronounced for the entry-level than the
\npremium-hatch category. Based on market intelligence by the MSIL sales team, while gross margins varied from 3.5
\nto 5 per cent, depending on the manufacturer and the product, net margins remained around 2 to 3 per cent across the
\nindustry. MSIL management expected the net margins to remain low across the segment because dealerships had to
\nshare part of the ever increasing consumer promotion expenses with the manufacturers. These expenses were
\ntypically much higher for the premium hatches as compared to the rest of the A-segment.
\nConsidering the low sales margin in A-segment cars, dealership viability in new car sales remained problematic.
\nWith high sales requirements for channel viability, penetration in rural markets was a challenge for most
\nmanufacturers, since reaching break-even volumes on a regular basis was very difficult in these markets. Even
\ncompanies like Maruti Suzuki and Hyundai had struggled to penetrate beyond the district level. The largest 20 cities
\nin India in terms of car sales had dealerships of 21 car manufacturers, while the figure for the next 30 cities was 17.
\nMSIL internal reports indicated that only nine manufacturers had dealerships beyond the top 100 cities (with respect
\nto industry sales), and just two had dealerships outside the top 200 cities.
\nDealerships had to develop their used car businesses, as many consumers were now buying a replacement car. These
\nconsumers typically wanted the dealership to also buy back the old car, which could act as a consumer retention
\nstrategy for the dealerships. Dealerships had to set up additional infrastructure for this business; however they also
\nenjoyed double gross margins in the used car business as compared to new car sales. For instance, a four-year-old
\ncompact car could fetch a gross margin of 6 to 8 per cent, as compared to a similar new car that would fetch only 2
\nto 4 per cent.
\nThere was intense competition in the used car business, as it included independent used car dealerships as well as
\nthe dealerships of other car manufacturers. MSIL had done its own internal research, which showed that independent
\nused car dealerships were selling around 75 per cent of the total market. Their main value proposition was that they
\noffered consumers the choice of switching their original brands as well as a 2 to 5 per cent price advantage as
\nThis document is authorized for use only by Chellyn Jones in QSO-500-X2223 Business Research 20TW2 at Southern New Hampshire University, 2021.
\nPage 5 9B15A016
\ncompared to dealerships of car manufacturers. Conversely, dealerships enjoyed superior brand image, reduced
\nhassle and no gap between the receipt of the new car and the sale of the old car.
\nCONSUMER BEHAVIOUR
\nThe consumer base for the A-segment was evolving. In the past, only high-income consumers could afford a car but
\nfrom 2000 to 2010, the threshold annual salary for consumers seeking an entry-level car reduced from \u20b9600,000 to
\n\u20b9300,000. These new consumers tended to be younger. The change could be attributed to increased ease of
\naccessing credit and finance options. Almost 85 per cent of the entry and mid-hatch segment was financed, while the
\nfigure declined to 70 per cent for the premium-hatch segment. Average financing in the industry was 75 per cent,
\nwhile rural financing was 60 per cent (largely due to cultural aversion to credit and lack of credit infrastructure) (see
\nExhibit 6).
\nHistorically, the Indian car consumer had been a price seeker; however, younger consumers were more trend
\nconscious, and responded to lifestyle aspects of product and marketing stimuli. These consumers required products
\nwith value proposition and desired the perfect combination of styling, features and performance at an affordable
\nprice. However, although consumer requirements were changing with changing lifestyles, the desire for owning a
\n\u201cvalue-for-money\u201d product was still prevalent. Thus, requirements like good fuel efficiency and affordable price
\nwere important to consumers.
\nConsumer buying behaviour was complex. First-time buyers went through a process of problem recognition,
\nidentification of alternatives, evaluation of alternatives, purchase and finally, post-purchase evaluation. Important
\nconsiderations included customer experiences at the dealership, test drives, word-of-mouth recommendations by
\nfriends and relatives, and re-sale value.
\nIn the top 100 cities and towns (with respect to industry sales), consumers\u2019 professional circles (including
\ncolleagues) influenced their choices regarding brand and product. Alternatively, in other markets, immediate family,
\nfriends, acquaintances and village elders influenced the decision-maker. Influencers normally recommended based
\non their own prior brand experience. Since not all brands were available in smaller towns and rural areas, existing
\nbrands with much longer presence and greater distribution reach enjoyed better acceptance.
\nIn the top 50 cities in India (in terms of car sales), brand name and brand-related associations played an important
\nrole in the purchase decision, as each product had lifestyle and status connotations apart from its functional and
\nutility value. Consumers purchased different brands for meeting different psychological needs (see Exhibit 7).
\nRaising brand equity was a key challenge for automakers and they invested heavily in advertising.
\nAs per market research conducted by MSIL, consumers based their buying decision on the utility of the product and
\nits features for meeting their needs. In general, new products with additional features at reasonable incremental
\nprices were preferred across the country. Geographical location had a distinct effect on consumers\u2019 product
\nevaluations (see Exhibits 8 and 9). There were other geography-based variations as well \u2014 e.g., the percentage of
\nwomen among car buyers was increasing in the top 20 cities (in terms of car sales). This trend increased the
\nacceptance of automatic transmission in India. Similarly, increased traffic congestion in major cities had also been
\ncontributing to the shift towards automatic transmission models amid increased convenience. Interestingly, at the
\nsame time, the Indian market had witnessed successful launches of compact SUVs\/MUVs, such as the Renault
\nDuster and the Maruti Suzuki Ertiga. This trend could be explained by the changing lifestyles of urban consumers,
\nwho needed flexible vehicles and increased utility to manage everyday needs.
\nConsumers could be classified based on their purchase situations. First-time buyers were those who had no prior
\nexperience of buying or using a personal car. They mostly opted for entry-level hatch vehicles, while a few bought
\nmid-level hatch vehicles. The second group comprised customers who already owned a car and were now buying an
\nadditional car. This group was equally divided between mid- and entry-level hatch vehicles. Yet another set of
\ncustomers \u2014 those who had a car and were now seeking to replace that car \u2014 typically upgraded to premium-hatch
\ncars, followed by sedans and, for a select few, SUVs (see Exhibit 10).
\nThis document is authorized for use only by Chellyn Jones in QSO-500-X2223 Business Research 20TW2 at Southern New Hampshire University, 2021.
\nPage 6 9B15A016
\nCONSIDERATIONS IN PRODUCT DEVELOPMENT
\nEmissions and safety regulations played an important role in product-development decisions. For safety, all new
\nvehicles were required to comply with offset-and-crash regulations starting in 2017.5
\nTherefore, any new product
\n(conceived in 2013, for example) had to be compliant with these mandates, which added to the vehicle cost.
\nAutomakers could either reduce cost in some other areas or pass the cost on to the customer. However, increased
\ncompetition in the industry was putting a counter pressure on automakers to lower the price of cars. This difficult
\nsituation made the choice of product features and other issues of the product design even more critical.
\nFuel prices had increased (and continued to increase) across the globe. India was dependent on oil imports and it
\nfaced additional pressure because of regular devaluation of its currency. Consequently, the price of petrol had
\nincreased from \u20b940 per litre in January 2009, to \u20b966 per litre in March 2013. In the same period, the price of diesel
\nhad risen from \u20b930.8 per litre to \u20b948 per litre.6
\nAs a result, for economic reasons, customer preference shifted
\ntowards diesel vehicles.
\nThe Government of India had been experiencing a fiscal deficit and a considerable part of it was because of the oil
\nsubsidy. The government had tried to reduce the subsidy but faced political hurdles. It had deregulated petrol prices
\nin 2012, and had shown increasing intent on reducing the subsidy on diesel. MSIL management expected the gap
\nbetween petrol and diesel prices to remain in the future (considering the government\u2019s political compulsions);
\nhowever, the extent of such subsidy and the consequent gap in prices was hard to predict.
\nDiesel engines were associated with higher levels of noise, vibration and harshness, high maintenance costs and
\nhigher emission levels. However, diesel technology had improved significantly since 1980. As a result, diesel
\nengines in cars were much more refined, with lower noise, vibration and harshness, higher fuel efficiency and lower
\nemissions, thereby improving acceptance and sales of diesel models versus petrol cars. In the MSIL product lineup,
\nthe share of diesel vehicles was around 80 per cent of MSIL product sales (including models like the Swift and the
\nDZire). The MSIL team estimated that the number of diesel models in the industry had increased from around 30 in
\n2009, to more than 50 in 2013. Global auto majors such as Honda and Hyundai, which were primarily focused on
\npetrol models, had started to shift their focus to diesel \u2014 especially for the Indian market. The MSIL team had
\ninformation that Hyundai and Honda planned to launch diesel products in India in 2014.
\nDiesel cars cost slightly more than petrol models to produce and greater taxes were levied on them, making them
\naround 20 to 25 per cent more expensive than comparable petrol versions; however, they were approximately 15 to
\n20 per cent more fuel efficient than petrol versions. Thus, only heavy users (i.e., customers who drove more than
\n30,000 kilometres per year) found it economical to use diesel vehicles, as the savings in fuel cost offset the other
\ncosts.
\nPRODUCT CHOICE DILEMMA
\nThe entry-level hatch segment was a \u201cconsumer pull driven product,\u201d in 2003, but by 2013, it had evolved into a
\n\u201cchannel push driven product.\u201d Consumers did not have a thorough understanding of the segment\u2019s technological
\ncomplexity. With greater choices available in terms of models, features and brands, sales representatives had a
\nsignificant role in influencing these choices. For this reason, manufacturers were wooing customers with
\npromotional schemes (sometimes as high as 20 per cent of the car price) and compensating their trade channels with
\nhefty sales-linked incentive schemes. This phenomenon was more prevalent in urban markets than in rural markets,
\nwhich could be attributed to the higher intensity of competition in these regions. MSIL\u2019s team felt that targeting the
\nright consumer segment and designing appropriate features and benefits were critical components for the success of
\nany product.<\/p>\n
5
\nA crash test was a form of destructive testing, usually performed to ensure safe design standards in crashworthiness and
\ncrash compatibility. Frontal impact tests were conducted on a solid concrete wall at a specified speed, but could also be
\nvehicle-vehicle tests.
\n6
\nSoftUsvista, \u201cNew Delhi Petrol Price,\u201d www.mypetrolprice.com\/2\/Petrol-price-in-Delhi?FuelType=0&LocationId=2,
\naccessed September 8, 2015.
\nThis document is authorized for use only by Chellyn Jones in QSO-500-X2223 Business Research 20TW2 at Southern New Hampshire University, 2021.
\nPage 7 9B15A016
\nMSIL\u2019s product development team had developed the following qualitative descriptions of the A-segment target
\nconsumers:
\nEntry-level hatch consumers:
\n\uf0b7 Mostly first-time buyers.
\n\uf0b7 Very price sensitive; concerned with fuel efficiency.
\n\uf0b7 Annual household income of \u20b9300,000 to \u20b9500,000; aged 30 to 34 years with a family of one or two children.
\n\uf0b7 Used car perceived as a convenience; satisfying basic travel needs for family.
\n\uf0b7 Usually satisfied with basic car features and already owned a motorcycle, which would continue to be used in
\naddition to the car.
\n\uf0b7 Had been initiated to the MSIL vehicle since childhood and aspired to own one when they grew up.
\nMid-level hatch consumers:
\n\uf0b7 First-time as well as additional car buyers looking to upgrade to a more expensive product out of necessity.
\n\uf0b7 Annual income of \u20b9400,000 to \u20b9800,000; aged 25 to 30 years; typically unmarried or, if married, no children.
\n\uf0b7 Used vehicle for recreation and to project identity and communicate social status (hence, brand conscious,
\nthough not necessarily looking for a contemporary brand).
\n\uf0b7 Accepted MSIL as a very good brand and acceptable from the perspective of image association.
\nPremium-hatch consumers:
\n\uf0b7 Had already owned a car for at least three years; hence, additional car or replacement car buyer.
\n\uf0b7 Annual income of \u20b9400,000 to \u20b91 million; aged between 30 to 45 years, had a nuclear family with husband,
\nwife and one or two children.
\n\uf0b7 Very brand conscious; considered vehicle as a product to build social status.
\n\uf0b7 Mostly employed as managerial staff in urban areas or self-employed in rural\/semi-urban areas.
\n\uf0b7 Looked for international brands to project a contemporary image.
\nGenerally, the product lifecycle of a successful automobile model was approximately six years, with at least two
\nchanges in its external design and internal features during these years. Based on past trends, any new MSIL product
\nneeded to sell 100,000 to 250,000 units (depending on its price and associated margins) to recover the required
\ninvestments and to be considered successful. By estimating market price and production costs, the product-planning
\nteam determined that the entry-hatch would require minimum sales of 300,000 vehicles per year to break even in
\ntwo years, while the corresponding sales figures for the mid-level hatch and premium-hatch were 200,000 and
\n150,000, respectively.
\nDesign-direction, platform-selection and product-making philosophies were dependent on the selection of features
\nand benefits to be incorporated into the new product. It was not possible to design one product that could cater to the
\nneeds of customers belonging to different segments. Hence, trade-offs had to be made; for example, if more power
\nwas required, fuel efficiency had to be reduced. In this way, the product had to be designed and optimized for a
\nparticular sub-segment of the A-segment to ensure that it met the design specifications. Therefore, the target
\nsegment and product design brief needed to be absolutely clear before the design conceptualization stage.
\nMSIL enjoyed economies of scale across the value chain. Higher sales volumes reduced per-unit overheads, reduced
\nraw material, procurement and logistics costs, and improved efficiency in production, distribution and marketing.
\nFor example, because of MSIL\u2019s high sales (the brand was very popular, and was considered to be sturdy and
\nreliable), the company\u2019s per unit advertising costs were the lowest in the industry. Though it had Suzuki as a major
\nstakeholder, it was perceived to be an Indian brand; however, it lacked the status and technology image enjoyed by
\nmany multinational brands. Similarly, the impact of word of mouth was also expected to be favourable for MSIL
\ncompared to its competitors \u2014 particularly in cities beyond the top 50 (in terms of total car sales).
\nThe technology platforms for the petrol and diesel vehicles were entirely different. The product planning team had
\nto decide whether the chosen design was for a diesel engine, a petrol engine or both. The team had access to some
\ntrends in the industry about the fuel preference of the market (see Exhibit 11). It also had to consider the specific
\nThis document is authorized for use only by Chellyn Jones in QSO-500-X2223 Business Research 20TW2 at Southern New Hampshire University, 2021.
\nPage 8 9B15A016
\npositioning of the proposed product, and its impact on the other MSIL products. The team decided that the best way
\nto visualize the product positioning would be to use the Boston Consulting Group (BCG) matrix of MSIL\u2019s existing
\nproduct portfolio (see Exhibit 12).
\nA summary of the product alternatives was developed (see Exhibit 13). The choice before the team was basically in
\nterms of product and market. Was MSIL better off battling the competition in the top 20 cities (where the maximum
\naction was) or should it fortify its position in smaller markets? Or should the company try to develop entirely new
\nmarkets? From a strategic point of view, would a premium-hatch add significantly to the brand image and channel
\nmotivation as compared to an entry-level hatch? Was there merit in projecting a mid-level hatch product, which
\ncould redefine consumer expectations and be positioned on higher space and fuel economy? Would the entry-level
\nhatch segment have to be merged with the mid-level hatch segment because of the cost pressures of regulatory
\ncompliances? What was the probable profit potential of each category? The product planning team needed to work
\nout the figures and make a recommendation.
\nJaydeep Mukherjee is a faculty member at MDI Gurgaon. Gaurav Mathur and Nikhil Dhar are employees of MSIL.
\nThis document is authorized for use only by Chellyn Jones in QSO-500-X2223 Business Research 20TW2 at Southern New Hampshire University, 2021.
\nPage 9 9B15A016
\nEXHIBIT 1: DETAILS OF THE SEGMENTS IN INDIAN CAR MARKET
\nSegment Products Price range in \u20b9 Consumer
\nRequirement
\nSpecific Attributes
\nEntryhatch
\nMSIL Alto 800, MSIL Alto K10, Tata
\nNano, Hyundai Eon, Chevrolet
\nSpark
\n200,000 \u2013 300,000 Functional and
\nbasic
\nPrice point driven
\nand yet value for
\nmoney; good fuel
\nefficiency and
\naffordable price
\nMidhatch
\nMSIL Wagon-R, MSIL Zen-Estilo,
\nMSIL A-Star, Hyundai i10,
\nChevrolet Beat, Ford Figo, Tata
\nIndica, Honda Brio
\n300,000 \u2013 400,000 Value for
\nmoney for
\nmore evolved
\nconsumers
\nValue for money
\nover the entire
\nlifecycle
\nPremiumhatch
\nMSIL Swift, MSIL Ritz, Hyundai i20,
\nVW Polo, Nissan Micra, Toyota
\nLiva, Tata Indica Vista
\n400,000 \u2013 550,000 Stylish,
\nconvenient and
\nefficient
\nStyle, interior space
\nand convenience
\nSedan Honda City, Hyundai Verna, MSIL
\nSwift Dzire, MSIL SX4
\nBasic: 550,000 \u2013
\n1.1 million
\nLuxury: 2.5 million
\nand upwards
\nStatus and
\ncomfort
\nBrand image,
\ntechnology and
\nsophistication
\nSUV\/MUV SUV \u2014 Mahindra XUV500,Honda
\nCRV, GM Captiva, Toyota Fortuner,
\nMUV \u2014 GM Enjoy, Nissan Evalia,
\nToyota Innova, MSIL Ertiga
\n900,000 \u2013 over 2
\nmillion
\nAdventure,
\nextended
\nfamily and
\npeople carrier
\nPower, utility and
\nversatility
\nVan MSIL Ecco, Tata Ace Magic 250,000 \u2013 400,000 People carrier People carrier
\nSource: Company materials.
\nEXHIBIT 2: SALES OF PASSENGER CARS (IN \u2018000 CARS)
\nSegment
\n2008\/09 2009\/10 2010\/11 2011\/12 2012\/13
\nINDIA MSIL INDIA MSIL INDIA MSIL INDIA MSIL INDIA MSIL
\nEntry-hatch 294.5 262.0 340.9 268.2 478.4 373.3 486.7 331.5 435.1 284.6
\nMid-hatch 497.6 188.8 581.2 218.7 628.8 252.1 527.4 177.3 415.1 156.2
\nPremiumhatch 128.2 110.1 262.7 179.3 438.9 209.6 499.8 218.3 531.8 244.0
\nA-Segment
\n(total) 920.2 560.8 1184.8 666.2 1546.0 835.0 1513.9 727.1 1382.0 684.9
\nSedan 247.0 75.9 302.5 99.3 415.3 131.4 492.7 128.6 491.8 176.5
\nSUV\/MUV 202.5 7.5 240.9 3.9 297.8 5.7 347.3 6.5 538.5 79.2
\nVan 106.6 77.9 150.3 101.3 213.5 160.6 227.8 144.1 230.8 110.5
\nTotal Car
\nIndustry 1,551.2 722.1 1,949.2 870.8 2,520.4 1,132.7 2,629.8 1,006.3 2,686.4 1,051.0
\nSource: Company materials.
\nThis document is authorized for use only by Chellyn Jones in QSO-500-X2223 Business Research 20TW2 at Southern New Hampshire University, 2021.
\nPage 10 9B15A016
\nEXHIBIT 3: YEAR-WISE MARKET SHARE PROJECTIONS
\nOF MAJOR CAR MANUFACTURERS IN INDIA*
\nYear
\nManufacturer\u2019s name 2008\/09 2009\/10 2010\/11 2011\/12 2012\/13
\nMSIL 46.51 44.63 45.28 38.27 39.12
\nHyundai Motor India Limited 15.72 16.14 14.37 14.78 14.28
\nTata Motors Limited 14.86 14.65 13.96 14.12 11.71
\nMahindra and Mahindra Ltd. 6.85 7.72 7.2 9.34 11.57
\nToyota Kirloskar Motors Pvt. Ltd. 3.02 3.27 3.36 6.09 6.16
\nGeneral Motors India Pvt. Ltd. 3.96 4.46 4.28 4.08 3.28
\nFord India Pvt. Ltd. 1.8 1.89 3.94 3.52 2.87
\nHonda Cars India Ltd. 3.38 3.17 2.38 2.07 2.74
\nVolkswagen India Pvt. Ltd. 0 0.21 2.06 2.98 2.44
\nRenault India Pvt. Ltd. 0 0 0 0.14 1.95
\nNissan Motor India Pvt. Ltd. 0.01 0.02 0.52 1.26 1.38
\nSkoda Auto India Pvt. Ltd. 0.89 0.9 0.92 1.3 1.08
\nOthers 3 2.94 1.73 2.05 1.42
\n*All figures are in percentages.
\nSource: Company materials.
\nEXHIBIT 4: TATA NANO SALES FIGURES AND SOME EXPLANATIONS
\n0
\n2,000
\n4,000
\n6,000
\n8,000
\n10,000
\n12,000
\nReasons for drop in sales:
\n1. Safety reasons
\n2. ‘Pay-First, Drive-Later’ booking
\nmodel did not reach the intended
\ntarget customers.
\nReasons for gain in sales:
\n1. Zero down payment option
\n2. Free 4-yr\/60,000 km extended warranty
\nReasons for gain in
\nsales: Nano Facelift
\nVersion launch
\nSource: Industry estimates compiled by case authors based on the research inputs made available by MSIL\u2019s research
\nwing.
\nThis document is authorized for use only by Chellyn Jones in QSO-500-X2223 Business Research 20TW2 at Southern New Hampshire University, 2021.
\nPage 11 9B15A016
\nEXHIBIT 5: OPERATING COSTS OF DEALERSHIPS ACROSS LOCATIONS
\nLocation of Dealership
\nTop 20
\nCities
\nTop 21\u2013
\n50 Cities
\nTop 51\u2013200
\nTowns Rural
\nInfrastructure
\nLand* 150 100 75 50
\nBuilding 25 20 15 10
\nEquipment 15 15 15 15
\nPermissions 2 2 2 2
\nMiscellaneous 10 8 6 5
\nWorking
\nCapital
\nVehicle 80 60 40 30
\nSpare parts 2.5 2 1.5 1
\nConsumables 1 1 1 1
\nManpower 2 2 1.5 1
\nUtility 0.5 0.5 0.5 0.5
\nMiscellaneous 5 5 4 3
\nRent (Annual)* 30 22 15 8
\nNote: All figures in \u20b9 million.
\n*Either the land was purchased or rented.
\nSource: Company materials.
\nEXHIBIT 6: PROFILE OF EXISTING A-SEGMENT CONSUMERS IN INDIA
\nMonthly average
\nhousehold income Occupation in percentage
\nSegment
\nAvg.
\nage
\nin
\nyears
\nLess
\nthan
\n\u20b950,000
\n\u20b950,000
\n\u2013
\n\u20b975,000
\nAvg.
\nfamily
\nsize
\nFirsttime
\nbuyer
\nSelfemployed
\nMiddle
\nManagement Professional
\nGovt.
\nemployee
\nEntryhatch 37 21% 63.40% 4.68 61% 51 11 14 5
\nMidhatch 36 17% 71.60% 5 59% 45 12 15 9
\nPremiumhatch 34 11% 77.80% 4.57 50% 55 12 14 5
\nSource: Company materials.
\nThis document is authorized for use only by Chellyn Jones in QSO-500-X2223 Business Research 20TW2 at Southern New Hampshire University, 2021.
\nPage 12 9B15A016
\nEXHIBIT 7: REASONS TO PURCHASE DIFFERENT CAR BRANDS
\nGood reputation\/reliability
\nof the brand
\nRecommended by
\nfriends\/relatives
\nPrevious experience
\nwith the brand
\nMaruti Suzuki 65.6 54.6 19.2
\nHyundai 54.3 46.7 12.9
\nTata 48.5 39.1 13.9
\nChevrolet 53.8 48.4 8.9
\nFiat 57.5 52.1 12.2
\nFord 63.9 53.6 5.8
\nHonda 61.1 54.5 14.8
\nMahindra 53.5 51.7 14.5
\nNissan 50.3 50.7 8.9
\nSkoda 60.8 49.4 7.1
\nToyota 67.6 51.2 11.0
\nVolkswagen 64.7 49.5 8.3
\nTotal Industry 57.1 47.8 14.9
\nNote: The table denotes the importance of different attributes by percentage of consumers.
\nSource: Company materials.
\nEXHIBIT 8: IMPORTANCE OF DIFFERENT PRODUCT ATTRIBUTES
\nVariable Top 20
\ncities
\nTop 21-50
\ncities
\nTop 51-200
\ncities
\nBeyond 201
\ncities
\nPrice 9 10 10 10
\nBrand 8 7 7 6
\nReliability 7 8 9 10
\nWord of mouth 6 7 8 9
\nStyling 7 7 6 6
\nResale 5 6 7 8
\nOverall cost of ownership 10 9 8 8
\nFuel efficiency 7 7 8 8
\nConvenience 8 7 7 7
\nDealer persuasion 7 8 9 10
\nPromotional offers 8 8 7 7
\nInterior space 7 8 9 10
\nNote: Importance scores were given in a 10-point scale where 10 was the highest score obtainable.
\nSource: Industry estimates compiled by case authors based on the MSIL\u2019s internal reports.
\nEXHIBIT 9: SALES DATA OF KEY COMPETITORS ACROSS GEOGRAPHIES (%)
\n2008\/09 2012\/13
\nCompany Top 20
\ncities
\nTop 21\u2013
\n50 cities
\nTop 51\u2013
\n200 cities
\nBeyond
\n201 cities
\nTop 20
\ncities
\nTop 21\u2013
\n50 cities
\nTop 51\u2013
\n200 cities
\nBeyond
\n201 cities
\nMSIL 48 19 28 5 42 18 28 12
\nHyundai 56 20 23 1 50 19 27 4
\nTata 47 21 31 1 42 20 35 3
\nIndustry 52 20 26 2 46 19 27 8
\nSource: Industry estimates compiled by case authors based on the MSIL\u2019s internal reports.
\nThis document is authorized for use only by Chellyn Jones in QSO-500-X2223 Business Research 20TW2 at Southern New Hampshire University, 2021.
\nPage 13 9B15A016
\nEXHIBIT 10: MOTIVATION FOR A-SEGMENT CARS PURCHASED FROM MARUTI SUZUKI (%)
\nFirst vehicle Additional vehicle Replacement
\nEntry-hatch 60.7 24.5 14.7
\nMid-hatch 59.1 17.4 23.4
\nPremium-hatch 50.3 24.5 25.2
\nTotal Industry 47.8 27.3 24.9
\nSource: Company materials.
\nEXHIBIT 11: SALES TRENDS FOR DIESEL AND PETROL VEHICLES
\nSegments Fuel CAGR
\n2007\/08 to
\n2011\/12 (%)
\nPROJECTED
\nCAGR 2012\/13
\nto 2017\/18 (%)
\nEntry- and midhatch
\nPetrol 5 2
\nDiesel 5 25
\nTotal 5 11
\nPremium-hatch
\nPetrol 10 -1
\nDiesel 30 18
\nTotal 40 14
\nSedan
\nPetrol 0 2
\nDiesel 30 7
\nTotal 15 6
\nSUV\/MUV
\nPetrol 14 6
\nDiesel 13 10
\nTotal 13 10
\nVan
\nPetrol 13 -24
\nDiesel 20
\nTotal 13 8
\nTotal Cars
\nPetrol 6 1
\nDiesel 29 15
\nTotal 14 10
\nSource: Company materials.
\nThis document is authorized for use only by Chellyn Jones in QSO-500-X2223 Business Research 20TW2 at Southern New Hampshire University, 2021.
\nPage 14 9B15A016
\nEXHIBIT 12: BCG MATRIX FOR MSIL
\nSource: Company materials.
\nEXHIBIT 13: THE PRODUCT DEVELOPMENT CHOICES
\nSegment Value proposition
\nPrice, target market
\nand competitive
\nretaliation
\nStrategic role of the
\nproduct
\nLimitations of this
\nchoice
\nEntry-hatch
\n10% more fuel efficient
\nthan comparable
\nproducts and value for
\nmoney.
\n~250,000
\nMarkets beyond top
\n50 cities
\nNissan Datsun, Tata
\nDolphin
\nMSIL\u2019s core
\ncompetency; can
\ndominate the market as
\nthe competition is less,
\nand difficult for
\ncompetition to achieve
\nthis price level.
\nLower profit margins;
\nif not successful then
\nproduct would not
\nmeet its break-even
\nobjectives.
\nMid-hatch
\nInterior space (10%
\nmore with respect to
\ncurrent comparable
\nvehicles), convenience
\n(utility features) and
\ntotal cost of ownership.
\n~375,000
\nTop 100 cities
\nFord Small Car,
\nNissan Small Car
\nLarge customer base
\nupgrading from entryhatch to mid-hatch;
\nproduct for family still a
\nlarge market.
\nThe positioning was
\nmiddle of the
\nsegment (hence not
\nprecisely defined);
\ntarget market was
\nonly in limited
\ngeographies. It was
\nnot expected to have
\na high contribution
\nmargin.
\nPremiumhatch
\nStylish (unique styling
\nwith respect to current
\nvehicles available).
\nTechnologically
\nadvanced (new
\nfeatures). High
\nperformance (higher
\npower).
\n~500,000
\nTop 50 cities
\nFord Fiesta Hatch,
\nfull model changes
\nof current products
\nCan act as a
\ndifferentiator; can
\ncreate brand image for
\nthe company; can
\ncreate new demand,
\npotential for making
\nanother vehicle (sedan)
\nout of this new vehicle.
\nHigh investment in
\nproviding
\ntechnologically
\nadvanced features.
\nIntense competition
\n\u2014 many global
\ncompetitors already
\nhaving stylish and
\ntechnologically
\nadvanced products.
\nSource: Compiled by case authors based on company material.
\nThis document is authorized for use only by Chellyn Jones in QSO-500-X2223 Business Research 20TW2 at Southern New Hampshire University, 2021.<\/p>\n","protected":false},"excerpt":{"rendered":"
W15582 MARUTI SUZUKI INDIA: DEFENDING MARKET LEADERSHIP IN THE A-SEGMENT Jaydeep Mukherjee, Gaurav Mathur and Nikhil Dhar wrote this case solely to provide material for class discussion. The authors do\u2026<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7661,7664,7660,7665,7662,7663,7659],"tags":[7651,7656,7655,7658,7650,7654,7652,7657,7653],"class_list":["post-54950","post","type-post","status-publish","format-standard","hentry","category-1-assignment-help-online-service-for-students-in-the-usa","category-australian-best-tutors","category-can-someone-write-my-assignment-for-me","category-do-my-essay-assignment","category-help-me-write-my-dissertation","category-homework-for-you","category-write-my-assignment-help-for-college-students","tag-ai-plagiarism-free-essay-writing-tool","tag-best-trans-tutors","tag-buy-essay-uk","tag-cheap-dissertation-writer","tag-help-with-writing-an-essay","tag-help-write-my-paper-ai-free","tag-online-essay-writers","tag-phd-essays","tag-write-my-essay-for-me"],"_links":{"self":[{"href":"https:\/\/www.essaybishops.com\/essays\/wp-json\/wp\/v2\/posts\/54950","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.essaybishops.com\/essays\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.essaybishops.com\/essays\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.essaybishops.com\/essays\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.essaybishops.com\/essays\/wp-json\/wp\/v2\/comments?post=54950"}],"version-history":[{"count":0,"href":"https:\/\/www.essaybishops.com\/essays\/wp-json\/wp\/v2\/posts\/54950\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.essaybishops.com\/essays\/wp-json\/wp\/v2\/media?parent=54950"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.essaybishops.com\/essays\/wp-json\/wp\/v2\/categories?post=54950"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.essaybishops.com\/essays\/wp-json\/wp\/v2\/tags?post=54950"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}