major change occurred
TRANSCRIPT
Major change occurred
Increasing Ties with GM in the Early 21st CenturySpurred in part by the 1998 creation of DaimlerChrysler AG, which shook up the global auto industry, GM and Suzuki strengthened their relationship. In 1998 the companies agreed to jointly develop subcompact cars for the European market, and GM spent about $318 million to increase its stake in Suzuki to 10 percent. Early in 2000 their jointly developed European car, the Suzuki Wagon R+/Opel Agila, began coming off assembly lines in Hungary (through Magyar Suzuki) and Poland (through an Opel plant--Adam Opel AG being a GM subsidiary). The partners were also active on the South American continent: In April 2000 production of the Grand Vitara began at General Motors de Argentina S.A. The companies also were collaborating in Colombia, Ecuador, and Venezuela.In June 2000 Osamu Suzuki, who had served as president of Suzuki Motor since June 1978, became chairman and CEO of the company. The longtime leader, who had married a granddaughter of the company founder and took his wife's family name, had built Suzuki into a global powerhouse through his consistent focus on small cars, cost-containment, and conservative fiscal practices, as well as an aggressive approach to expanding into developing markets. Taking over as president and COO was Masao Toda, who had been a vice-president in charge of technology, manufacturing, and purchasing. Toda remained president until April 2003, when he stepped down for health reasons and was replaced by Hiroshi Tsuda, a senior managing director.Suzuki and GM strengthened their alliance in September 2000, placing further emphasis on Suzuki's position as GM's small-car partner. GM subsequently injected about $600 million into Suzuki in January 2001 to increase its stake to 20 percent. As part of the deal, GM Chairman John F. Smith, Jr., gained a seat on the Suzuki board, becoming the first outsider to hold such a position. Part of the money invested into Suzuki went toward the start-up of production in Japan of a new jointly developed all-wheel-drive compact car, the Chevrolet Cruze. Japanese sales of the Cruze began in October 2001, and then exports of the vehicle to Australia began in April 2002 where it was sold as the Holden Cruze by a GM subsidiary, Holden, Ltd.On the motorcycle front, meanwhile, Suzuki and the other "Big Four" Japanese motorcycle makers (the others being Honda, Yamaha, and Kawasaki Heavy Industries, Ltd.) had for years faced heightened competition from newly insurgent European and U.S. manufacturers as well as from Chinese companies making pirated copies of their machines. Responding to such threats, Suzuki and Kawasaki announced in August 2001 that they had entered into a cooperation agreement whereby they would jointly develop new motorcycle models and would unify their parts procurement and production operations to cut costs. In an unrelated development, Suzuki in May 2002 began manufacturing products in the United States for the first time when a plant in Rome, Georgia, run by U.S. subsidiary Suzuki Manufacturing of America Corporation began turning out all-terrain vehicles (ATVs).Also during 2002 Suzuki converted two of its key overseas production joint ventures--Maruti Udyog in India and P.T. Indomobil Suzuki International in Indonesia--into consolidated subsidiaries by acquiring majority control of the ventures. Suzuki now held a 54.2 percent stake in Maruti Udyog and 90 percent of Indomobil Suzuki. In July 2003 the Indian government sold 25 percent of its remaining interest in Maruti Udyog to the public through an initial public offering (IPO).As part of GM's 2002 takeover of the remnants of the bankrupt Daewoo Motor Company of South Korea, Suzuki laid out $89 million for a 15 percent stake in GM Daewoo Auto & Technology, the South Korean company that GM formed as a successor to Daewoo Motor. The first outcome of this new alliance was the introduction of two new Suzuki models into the U.S. market in the fall of 2003, both of which were rebadged Daewoo models. The Verona, a five-passenger sedan competing directly against such top-sellers as the Toyota Camry and Honda Accord, marked Suzuki's entrée into the midsize segment of the car market, while the Forenza was marketed as a "premium" compact sedan. These vehicles were the first of nine new vehicles that Suzuki planned to introduce into the U.S. market
over a five-year period, during which time the firm aimed to roughly triple its U.S. sales from the 68,000 it sold in 2002 to 200,000 by 2007. Meantime, plans were being made for Suzuki to begin selling GM Daewoo models in Japan under the Chevrolet brand in either late 2003 or early 2004.At the same time that Suzuki was attempting to triple its U.S. sales, its legal battle against Consumers Union continued. By 2002 the ruling that had awarded $90 million to a woman paralyzed in a Samurai rollover accident had been overturned. Suzuki's lawsuit against Consumers Union was dismissed in 2000, but Suzuki won an appeal to a U.S. Court of Appeals, which in 2002 ordered the case to trial. Consumers Union then filed an appeal to the U.S. Supreme Court.Principal Subsidiaries: Bell Art Co., Ltd.; Enshu Seiko Co., Ltd.; Hamamatsu Pipe Co., Ltd.; Snic Co., Ltd.; S. Tech Co., Ltd.; Suzuki Akita Auto Parts Mfg. Co., Ltd.; Suzuki Business Co., Ltd.; Suzuki Hamamatsu Auto Parts Mfg. Co., Ltd.; Suzuki Marin Co., Ltd.; Suzuki Nousei Center Co., Ltd.; Suzuki Precision Industries Co., Ltd.; Suzuki Toyama Auto Parts Mfg. Co., Ltd.; Suzuki Transportation and Packaging Co., Ltd.; Suzuki Works Techno Ltd.; Suzuki Australia Pty. Ltd.; Suzuki Austria Automobil Handels G.m.b.H.; Cambodia Suzuki Motor Co., Ltd.; Suzuki Canada Inc.; Suzuki Motor de Colombia S.A.; Suzuki France S.A.; Suzuki International Europe GmbH (Germany); Magyar Suzuki Corporation (Hungary); Maruti Udyog Ltd. (India; 54.2%); P.T. Indomobil Suzuki International (Indonesia; 90%); Suzuki Italia S.p.A. (Italy); Myanmar Suzuki Motor Co., Ltd.; Suzuki New Zealand Ltd.; Pak Suzuki Motor Co., Ltd. (Pakistan); Suzuki Motorcycles Pakistan Ltd.; Suzuki Philippines Inc.; Suzuki Motor Poland Ltd.; Suzuki Auto Madrid S.A. (Spain); Suzuki Motor España, S.A. (Spain); Thai Suzuki Motor Co., Ltd. (Thailand); Thai Suzuki Trading Co., Ltd. (Thailand); Suzuki GB PLC (U.K.); American Suzuki Motor Corporation (U.S.A.); Suzuki Manufacturing of America Corporation (U.S.A.).Principal Competitors: Toyota Motor Corporation; Nissan Motor Co., Ltd.; Honda Motor Co., Ltd.; Mitsubishi Motors Corporation; Mazda Motor Corporation; Yamaha Motor Co., Ltd.; Ford Motor Company; DaimlerChrysler AG; Hyundai Motor Company.
Unlike Tata Motors, Maruti backs LPG
Our Corporate Bureau / New Delhi July 20, 2006
Maruti Udyog (MUL), the largest domestic carmaker, today put its weight firmly behind LPG (liquefied petroleum gas) as the alternative fuel of choice, while arch rival Tata Motors enhanced its association with CNG (compressed natural gas). “Our information is that CNG prices are artificially low and may undergo a major change. Besides CNG is available only in three-four cities,” MUL Managing Director Jagdish Khattar said at the launch of a new-look Wagon R and the Duo Wagon R, which can run on both petrol and LPG. Maruti does produce some units of Omni, the van fitted with the CNG mode and mostly seen as taxis in Delhi. However, the company seems reluctant to expand the CNG portfolio, owing to the availability issue and the price uncertainty factor. On the other hand, Tata Motors today launched the CNG version of its hatchback, Indica, and estate, Indigo Marina, that comply with the Bharat Stage-III emission norms. However, a company statement said it was also working on LPG offerings on its car range, which would be launched soon.
Maruti to hold its own for model touch-upsParvathy Ullatil, TNN, Dec 19, 2006, 01.45am IST
MUMBAI: India's largest car maker Maruti Udyog will increasingly work independently on model upgrades and collaborate with parent company Suzuki Motor on all new model launches.
Maruti intends to launch a new car and two model upgrades every year, which means Maruti's R&D team will work independently on the facelifts and collaborate with Suzuki on designing and developing new models right from scratch.
This follows a recent communication from its Japanese parent to step up its local R&D efforts. "We received a message from Suzuki saying Maruti should 'grow up' and help Suzuki's other global subsidiaries.
Suzuki says it is short of manpower in Japan and it has to divide its attention between Hungary, China and India. They are pushing us to do our own work now as making major changes in cars is a time-consuming process," said Mr Jagdish Khattar, MD, Maruti Udyog.
About 20-30 Indian engineers had worked with their Japanese counterparts for two years to help design the Swift, a hatch-back car and make it suitable for Indian conditions. Maruti is expected to play an incremental role in all future product launches, said Mr Khattar.
Maruti has budgeted around 4% of its turnover for R&D and is setting aside a major portion of land at its new Manesar facility for a test track. Suzuki is investing in training Indian engineers, who spend two to three years in Japan learning the ropes.
What started with a chance meeting between Mr Khattar and the senior MD(Engineering) of Suzuki Motor (SMC) on the stairway in Suzuki's headquarters six years ago has grown into a fairly large operation today with three divisions employing over 250 engineers.
Nearly 90 of these engineers have been trained in Japan by SMC and Suzuki has committed to extending further help by stationing four senior engineers from Japan in India to train and guide the team here.
Maruti kicked off its R&D operations six years ago and its first baby was the Zen facelift in 2003-end. This was followed by the Esteem facelift and the Swift collaboration.
When the Zen Estilo was unveiled earlier this month, the R&D team at Maruti Udyog had much to celebrate as the new car came fitted with over 91% of local components. This is considerably higher than the indigenisation on cars launched by any of Suzuki's other subsidiaries, usually around 60-65%, and helped Maruti keep the cost of the car competitive.
There are speculations that the R&D team at Maruti may be slowly inching towards an indigenously designed car. " Suzuki is not in a hurry and neither are we. At the end of the day in terms of quality, safety emission etc we have not reached the top level. Suzuki has to step in there and revalidate our efforts," said Mr Khattar.
Need for change ____________________
Corporate Social Responsibility
Maruti Suzuki has adopted a CSR policy, which serves as a guiding tool for the management and the employees in steering Maruti Suzuki towards long term sustained growth in harmony along with the interests of the stakeholder.
The role of the CSR department is to professionalize CSR activities in Maruti Suzuki and strengthen the mechanisms involving the activities. Significant efforts have been taken to contribute to society at large, through its corporate activities, especially in the areas of Road Safety and Vocational Training. Maruti Suzuki has set up dedicated teams with requisite expertise to steer the social projects.
CSR Concepts
Maruti Suzuki has adopted a CSR policy, which serves as a guiding tool for the management and the employees in steering Maruti Suzuki towards long term sustained growth in harmony along with the interests of the stakeholder.
The role of the CSR department is to professionalize CSR activities in Maruti Suzuki and strengthen the mechanisms involving the activities. Significant efforts have been taken to contribute to society at large, through its corporate activities, especially in the areas of Road Safety and Vocational Training. Maruti Suzuki has set up dedicated teams with requisite expertise to steer the social projects.
Compliance
To sustain being the preferred supplier of our cars to our customers, Maruti Suzuki abides by the statutory rules that need to be complied with. We make sure that all necessary regulatory and mandatory requirements for road worthiness as certified by ARAI are in place in each of the cars that we roll out. Our processes and systems too strictly adhere to and abide by to the above rules.
Maruti Suzuki to promote aspiring engineersMaruti Suzuki and Society of Automotive Engineers (SAEINDIA) signed an agreement on Monday to support the SUPRA SAEINDIA 2011 competition. This competition promotes young engineering talent for automobile engineering and facilitates participants to conceive, design and fabricate formula-1 style sports cars.
The agreement was signed by Shashank Shrivastava, Chief General Manager (Marketing) Maruti Suzuki and V Sumantran Chairman, SUPRA SAEINDIA, in the city.
On the occasion, Shashank Srivastava, Chief General Manager (Marketing) Maruti Suzuki said, “Just in the past five years the average age of our car buyers a drop of 10 years For these younger customers, we make youthful and energetic cars, while not compromising on the value of fuel efficiency.”
SUPRA SAEINDIA contest originated through the Society of Automotive Engineers (SAE International) USA promises a level playing field to budding under graduate and post graduate engineers across India.
The contest provides an opportunity to showcase their skills, understanding and passion for automobiles.
The contest will see 44 teams create their dream cars and test at the renowned Madras Motorsport Club race tracks near Chennai. The winning car will be displayed at Asia Pacific Automotive Conference at Chennai in Oct‘11 and Auto Expo’12.
At the time of the ACM last year, there was cautious optimism that the Indian economy would recover faster than the rest of the world. This actually happened and the GDP growth in 2009-10 was 7.4%. This year we
may see 8.5% growth. I am happy to report that Maruti Suzuki could establish a new record and cross the significant milestone of selling over a million cars in the last financial year. We were helped by the progressive policies of the government which provided stimulus for growth. However, our performance would not have been possible without the unwavering confidence and trust which the market displayed in the products and services offered by the Company. Equally, all our employees, and particularly those in the production and related areas, performed brilliantly and despite the shortage of installed capacity still managed to manufacture 100,000 cars in a month and a million cars in the year. It is this spirit of can do, shall do which has taken Maruti Suzuki to where it is today. The company works as a single team, and there are no distinctions between management and workers when it comes to furthering the interests of the company. Domestic consumption is what drives the growth of the Indian economy. The events which take place in the rest of the world cannot automatically be applied to India for making investment decisions or policy, though we should not also ignore that input. Exports do get impacted when there is a global recession, but since exports are a small part of total domestic consumption, the impact is not very significant. However, Maruti Suzuki as a company should perhaps deliberately not attempt to export a large part of its production, but keep exports at about 15% of output. We should concentrate more on the domestic market. To keep our market share, not only should we adequately increase manufacturing capacity, but also remain very aware of the changing consumer tastes and demands and be flexible in making quick adjustments. Secondly, sound financial practices both at the national and the company levels are essential for successfully meeting any unexpected developments anywhere in the world.The Company meets this requirement in every possible way, and I look for your continued support for such policies. We will also continue, with the involvement of our employees to look for all possible ways to reduce costs and improve productivity. Thirdly, we need to rapidly develop our own capacity to develop and design products. This is an area of priority for us and with the help of Suzuki we are investing heavily in research and development. The Indian economy is expected to see very good growth in the next few years. As per capita incomes rise above US$ 1500, we may reach an inflexion point where the demand for cars becomes significantly higher than in the past. We have to be prepared to expand capacities to meet that demand when it comes. Fortunately, our cash reserves will enable us to do so, without the risk of high leverage. Prudent financial policies have been adopted by us to prepare for such a situation in the future. An area of concern is infrastructure, particularly urban infrastructure. The highway construction programme has now picked up speed and that is welcome indeed. However, state governments seem almost helpless in improving urban infrastructure. While public transportation is being improved in some cities, it has to be realized that this will never replace the use of private transportation. Those with rising incomes will aspire to own their own means of transportation. Local and state governments have to build this into their plans and display political will in implementing programmes to improve urban infrastructure. The Company is trying to create the
infrastructure which will enable drivers to be properly trained before they are given licences. We hope this will increase safety and reduce accidents. However, without substantial improvements in infrastructure, the extent of improvement will remain small. All of us need to put pressure on our political leaders to quickly look at urban infrastructure development, as otherwise cities will descend into chaos. The rapid growth of the automobile sector is putting pressure on the component industry. Large investments need to be made to keep up with the growing needs of components. In addition, the component manufacturers now need to invest in building engineering and R&D capacities. We cannot remain dependant forever on foreign suppliers for component design as this will greatly handicap us in meeting the needs of our customers in reasonable periods of time. The Tier 2 and Tier 3 vendors will, in particular, pose problems as their capabilities to make investments and improve technology is limited. The Tier 1 vendors have to find a solution to this problem. I believe the component industry now has the opportunity to move to the next level, but to do so it will have to adopt the best corporate governance practices and become totally professional in their management. The Indian economy, and our industry, is faced with high attrition rates. This is the result of a shortage of well educated and experienced managers, engineers and skilled personnel. The problems of the education sector are immense and will impact the growth of the Indian economy. I believe we need more radical thinking and actions if this vital sector is to support the rising aspirations of our population. Industry needs to recognize the seriousness of the situation and join hands with the government to find workable solutions. A company can only have sustainable growth if its stakeholders interests are well looked after. The Company has always adopted business processes that inherently promote the well being of its customers, vendors, dealers, employees, shareholders, community, and the environment.
changes in the workforce and culture due to change process_____________________
Towards the Next Orbit
Aug 16th 2010
By Savreen Gadhoke
December 2010 will stand witness to the assembly of a galaxy of renowned thought leaders
for the National HRD Network Global Conference on Towards the Next Orbit. Established in
1985, the National HRD Network (NHRDN) is a not-for-profit association of over 8500
professionals voluntarily committed to promote the HRD movement in the country. NHRDN
serves the HR community through its 30 Chapters and a vibrant National Secretariat spread
across the country. The annual conference, the signature event of NHRDN, will not only
consider the array of forces that will play a pivotal role in the emergence of a new business
landscape, but will also be critical in understanding the business models, management
practices and processes to propel the country and organizations to the next orbit. While
understanding the nuances of doing business in the next orbit is important, it’s equally
critical to understand why this particular theme has been chosen for the annual conference.
In a prelude to the National HRD Network Global Conference on Towards the Next
Orbit,People Matters brings an exclusive insight into what led to the deliberation of this
theme by taking the views of imminent personalities and thought leaders from the field of
Human Resources.
Time for latest technology
S.K. CHATURVEDI, Conference Chairman
Chairman & Managing Director, Powergrid Corporation of India
“Indian business houses need to re-look on the past practices and make for total overhaul of
system procedures. With the opening of the economy, FDI is being encouraged for the
acceleration of the economic environment of the country. And unless Indian industries
change themselves, they will not be able to cope up with the advancements in technology,
which these foreign organizations will bring with them. So it is time that we move to the next
orbit and adopt the latest technology that will bring us at par with any global organization in
terms of doing business. Indian companies need to change not only from the point of view of
adopting the latest technology, but their thinking and mindset toward issues like tackling
competition, exploring new opportunities, identifying new markets, et al. Indian businesses
need to completely cut-off from the past legacies. It is not just a matter of financial security;
that is now a thing of past. People are now looking for something more in terms of job
satisfaction. With increased levels of education, a large chunk of the working population now
falls into the double income group category and their aspirations are high, which have to be
addressed by the HR manager. So it is time that companies become active and alert in
addressing such employee aspirations.”
It’s no more business; it’s a fierce battle field
PADMA SHRI DR. PRITAM SINGH, Conference Academic Chairman
Professor of Eminence, MDI Gurgaon; Former Director IIM Lucknow and MDI
“Doing business has turned into an intense war zone. Companies don’t know where their
enemies (competition) are hiding and when will they strike. To fight such wars, businesses
no longer need business managers, but business warriors who can identify potential
enemies and proactively prepare for their strike. Therefore, the whole HR function needs to
change if companies have to acquire business warriors. In such a business environment,
while stagnation is considered death and moving live; only moving faster can be considered
being alive for a business. And that’s why it’s important to move toward the next orbit to
keep yourself alive. To move to the next orbit, it is imperative that companies first set-off old
learnings and adopt new processes & practices. Not only the HR function but also the
business model needs to evolve. Hitherto, businesses followed a model of vertical
integration. But now, business models are no more vertically but virtually integrated. Key
components like technology are globally outsourced and this translates that having a
virtually integrated model will require an entirely different mindset, processes and even
workforce; hence it is imperative to move toward the next orbit in terms of business
strategies, managerial processes and leadership styles.”
Leaders must incorporate emerging trends in business strategies to excel globally
N.S. RAJAN, National President - NHRD Network
Partner, EMEIA, People & Organization Leader, Global Leader-HR Advisory, Ernst
& Young
“The global emerging business landscape is posing challenges to organizations that have
never been experienced before. At macro level, the downturn has brought higher
involvement from government in the private sector in terms of funding the crisis. The
financial markets too have undergone a radical change amidst the economic turmoil and this
has led to far more due diligence since money has become tight and has put remuneration
under spotlight. As per the E&Y Global Survey, matured economies grew by 1.3% in 2010 as
against the 5.3% experienced by emerging economies, which has made emerging markets
spearheading global growth. For companies to succeed in this new scenario, they will need
to focus on using technology oriented services such as analytics based decision making,
connectivity platforms, etc, to turn around their functioning; incorporate the need for
protecting the environment by bringing Resource Efficiency Agenda into the boardrooms;
overcome the talent challenges such as ageing population, vulnerable labour segments,
executive pay, etc. derived from the workforce composition in each economy. The
government too will have to play an increasing role in the new business environment by
introducing public financing for social sectors, sponsor social security and employer
retirement schemes, and encourage public savings. Leaders must incorporate these
emerging trends
in their business strategies to survive, grow and excel globally.”
Companies need to shift from tangibles
S.Y. SIDDIQUI, Regional President - North, NHRD Network
Managing Executive Officer - Administration (HR, Finance & IT), Maruti Suzuki
“Over the last 15-20 years, companies developed their competitive edge by sharpening their
expertise and core competence, and in the process, achieved incremental growth. But what
we are experiencing now is a distinct change as part of the globalization process; we are
seeing a change in the way businesses are done. So much so that the very definition of the
term ‘competitive edge’ is no longer dependant on tangibles such as cost, technology, et al,
but is shifting on the intangibles like speed, customer responsiveness, employee capability
and commitment, inspirational work culture, et al. So, it is time that companies work toward
building capabilities around intangibles for business growth. When we look at the NHRDN
Conference in December 2010 and talk about the Next Orbit, it simply means that the way
we used to do business may no longer be effective. Now we need to focus on the intangibles
to build our Competitive Edge which primarily leads to the criticality of Talent Perspective,
Innovation driven Work Culture and the Top Leadership role. The Business Strategy linked
with these perspectives can lead to new opportunities and potentialities in an intensely
competitive business environment.”
It is time the HR function makes itself obsolete
AQUIL BUSRAI, Former Executive Director-HR, IBM, Currently CEO, aquil busrai
consulting
“The Indian economic scene has been on an upswing not only in the IT or ITES Sector -
though it has been more visible here - but also in other sectors like Infrastructure, Retail,
Hospitality and even Manufacturing sectors. This growth has meant increasing demand for
talent and increasing pressures on organisations to attract as well as retain quality talent to
fuel this growth. Handling people issues has therefore become a business imperative which
actually affects the bottom line. As business moves to the next orbit, it is increasingly
expecting its support functions like HR to act in a more proactive manner to handle the
uncertainties and become effective partners. It is therefore time for the HR function to make
itself obsolete in its current role of simply providing support as asked for by the business -
instead HR itself has to move to the next orbit of facilitating business growth and performing
larger contributory role. Line managers need to take the responsibilities of handling people
issues and HR function needs to apply its expertise to equip these line managers to play the
new role. HR managers need to move beyond just tracking attrition and retention figures
and be equipped to take calculative steps in facilitating business decisions. They need to
develop a more holistic business mindset and participate in environment scanning,
understanding business trends, assessing what competition is doing and what new methods
and technology is coming on the horizon. And how all these will impact people issues. It is
only with this additional knowledge that HR will become a better business partner.”
HR - Key differentiator in business
DR. Y. V. VERMA
Chief Operating Officer, LG India
“With the globalization taking place rapidly and the diffusion of technology and related R&D
and knowledge, there is an unprecedented change in the current business scenario. The
world has become a global village with the advancement of technology and rapid
development. Factors such as enhanced knowledge base, increased competition and speedy
growth across sectors have ultimately led to the formulation of the theme ‘Toward the Next
Orbit’. The conference provides a global platform to have interface with CEOs/Business
Leaders/HR Professionals not only from India, USA, UK, Europe, APAC and South East Asian
countries to discuss and share the views on HR Talents, trainings, research and trends and
practices of Corporate India. Presently HR and Leadership is an integral part of an
organization and Human Resources. However, going forward, Human Resources will be the
key differentiator in businesses. The role of the HR will become very crucial in providing
breakthrough solutions to organization success.”
India is very rich in intellect and talent
P.V. RAMANA MURTHY
Vice President - HR, Hindustan Coca Cola Beverages
“India, with its booming economy is largely being reckoned as the next emerging nation.
World’s top companies are focusing on India as well as on China for establishing businesses
and expanding their footprint. Talking of India and China, there is a fundamental difference
between the two nations. One is the demographic dividend. While China has an ageing
population, India is relatively younger. Whatever qualities China had in terms of its people is
backfiring now with a majority of its population growing old. Secondly, India as a nation is
very rich in intellect and talent. Each country has a unique trait about its talent pool – you
find good leadership in USA, and discipline in Japan. For India, its strength lies in its intellect.
The third aspect is that the boundaries of the global environment have erased. The world is
becoming smaller and the aspiration of the new age managers are becoming global. Given
this scenario, in the next orbit, there will exist a business environment, which will have no
boundaries and people with greater intellectual capabilities will run the organizations. And to
be prepared for such a new business environment, it is imperative that organizations should
continuously brace themselves and its people to build such intellectual capabilities which
will enable them to create winning organizations.”
Workforce reduction & HR competencies: an exploratory study.Publication: Indian Journal of Industrial RelationsPublication Date: 01-JUL-10
Format: OnlineDelivery: Immediate Online Access
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Importance of Competency
Designed to help an organization meet its strategic objectives through building human resources capability, competency modeling has been in existence since the 1970's. An approach to competencies gained momentum by McClelland's (1973) research. There is a growing level of interest in managerial competencies and managerial performance with a wealth of literature (Boyatizs 1982, Spencer & Spencer 1993).
The dictionary (Oxford) meaning of "competence" is the ability or the state of being competent ("competent" meaning adequately qualified or capable). However, research literature in HR has brought out differences between the two terms "competence" and "competency". As per Rowe (1995), "competence" means a skill and the standard of performance while "competency" refers to behaviour by which it was achieved. Thus, competence describes what people do and competency describes how people do it.
Whiddett and Hollyforde (2004) viewed that all aspects of competency framework should be behaviour-based. According to Boyatzis (1982), "A job competency is an underlying characteristic of a person in that it may be a motive, a trait, a skill, an aspect of one's self-image or social role, or a body of knowledge which s/he uses". Referring to competency of a HR professional, Chanda and Kabra (2000) were of the view that 'the competency of a professional is determined through his/her level of knowledge, capacity to utilize skills and personal attitudes and values towards the HR function'. Spencer and Spencer (2008) defined competency as "an underlying characteristic of an individual that is causally related to criterion-referenced effective and/or superior performance in a job".
Workforce Reduction Scenario
During economic slowdowns, workforce reductions have become common, though it should be ideally seen as a last resort. The ultimate purpose of downsizing boils down to lowering the
operating expenses by employee elimination to achieve greater profits for the company (Nair 2008). But the hidden costs are often ignored. It is not only the victims who are affected but the survivors are equally affected.
A downsizing exercise can be said to be successful only when it can be seen that the survivors are adapting to the situation comfortably. It has been suggested that layoff survivors experience stress that is as great, or even greater than, the stress felt by those who have been laid off (Kaufman 1982). Studies have shown that downsizing can have profound effects on survivors' behaviour including trust and morale (Fisher 1991), job involvement (Allen et al 2001), withdrawal (Brockner 1990), work effort, productivity (Brockner et al 1992), and organizational attachment (Spreitzer & Mishra 2002).
Research has suggested that that the role of HR, whilst crucial in sustaining a well motivated workforce has become very wide-ranging. If organizations are serious about achieving the envisaged benefits of downsizing, the implementation of effective people-management strategies is very important. The role calls for a range of skills (of HR professionals), competencies and knowledge and understanding of organizational development, employee development, new forms of employee relations, and enhanced methods of using competencies to include behaviours such as managing ambiguity, insecurity and uncertainty (Kochanski 1996). Since downsizing is going to continue due to global changes and no organisation can predict as to when it might have to go for the same, it is important to realise that the right way to handle survivors is a challenge for which organisations should be geared up. In this scenario it has increasingly been felt that along with the corporate changes, HR competencies should also take shape in order to be able to contribute as a value added function.
Rationale & Objective of the Study
In a workforce reduction scenario it becomes a bigger challenge for HR professionals as to how to smoothen the exit process of the victims and keep the survivors motivated. Since decades, competencies have been used in the context of selection, performance appraisal, training and development. The present authors have tried to look into competencies (of HR professionals) in a workforce reduction scenario. The research was conducted keeping in mind the suggestions given by senior managers from the industry during interactions for a larger study related to workforce reduction. Majority of the practitioners, especially non-HR, pointed out that HR needs to play a more active role in a...
Maruti Udyog Limited – Managing Competition Successfully
RUTI UDYOG LIMITED – Managing competition successfully
Maruti Udyog Limited (MUL) was established in Feb 1981 through an Act of Parliament, to meet the growing demand of a personal mode of transport caused by the lack of an efficient public transport system. It was established with the objectives of - modernizing the Indian automobile industry, producing fuel efficient vehicles to conserve scarce resources and producing indigenous utility cars for the growing needs of the Indian population. A license and a Joint Venture agreement were signed with the Suzuki Motor Company of Japan in Oct 1983, by which Suzuki acquired 26% of the equity and agreed to provide the latest technology as well as Japanese management practices. Suzuki was preferred for the joint venture because of
its track record in manufacturing and selling small cars all over the world. There was an option in the agreement to raise Suzuki’s equity to 40%, which it exercised in 1987. Five years later, in 1992, Suzuki further increased its equity to 50% turning Maruti into a non-government organization managed on the lines of Japanese management practices.
Maruti created history by going into production in a record 13 months. Maruti is the highest volume car manufacturer in Asia, outside Japan and Korea, having produced over 5 million vehicles by May 2005. Maruti is one of the most successful automobile joint ventures, and has made profits every year since inception till 2000-01. In 2000-01, although Maruti generated operating profits on an income of Rs 92.5 billion, high depreciation on new model launches resulted in a book loss.
Read more: http://www.articlesbase.com/marketing-articles/maruti-udyog-limited-managing-competition-successfully-723310.html#ixzz3qE0jaQv7 Under Creative Commons License: Attribution
Workforce reduction & HR competencies: an exploratory study.Ads by GoogleAchieve Business Resultswith Business Execution Software Read the Whitepaperwww.SuccessFactors.com/Execution
Abstract:This study explores the competencies expected of HR professionals while handling the survivors in a downsizing scenario and also describes how managerial competencies could change in importance during periods of significant organizational transition. For the purpose of the study a competency enquiry list was generated through interaction with senior industry professionals, both HR and non-HR. The list comprising 10 competencies was administered to 34 top level managers belonging to 4 organizations (where workforce reduction had happened in the recent past) in the manufacturing sector in Delhi and NCR. The results of the study suggest that in a downsizing scenario the five most important competencies expected to be possessed by HR professionals are business acumen, interpersonal understanding, credibility, communication and ability to realign HR policies and practices.
Leadership_______________________________
Maruti Suzuki becomes the first advertiser in India to win the ...
Maruti Suzuki India Limited, country’s largest carmaker has won the prestigious MMA Asia Pacific and the Global awards for its digital campaign –‘Sports Sponsorship goes mobile.’ The Awards are given to companies for the best use of mobile media for branding purposes, both in the Asia Pacific region and globally. The award ceremony was held at Los Angeles, USA, last week.
This is the first time that any Indian company has been chosen for these prestigious awards at a global level. The awards Asia Pacific - Maruti Suzuki with Affle, Sports Sponsorship Goes Mobile and Global - Maruti Suzuki with Affle, Sports Sponsorship Goes Mobile were announced by Global Mobile Marketing
Association (MMA) at the ceremony on November 17 at Mobile Marketing Forum in Los Angeles. M/s Affle are Maruti Suzuki’s mobile media partner, whose products and services were used to drive this campaign.
Maruti Suzuki had executed “Sports Sponsorship goes mobile” campaign in 2010 around two of the largest sporting – The Indian Premier League (Cricket and FIFA World Cup. It was a two-month long campaign which used multiple mobile media platforms like Affle’s SMS2.0, Mobile Internet, Voice Portals and SMS advertising. The campaign reached to over 7 million users delivering unprecedented engagement levels. With over 1.2 million engagements and a 7 % CTR (Click Through Rate), this campaign played a very important role to get Maruti Suzuki connect with it’s target audience effectively.
The MMA received hundreds of submissions from companies across the globe. Winners were selected by the MMA Awards Selection Committee that's comprised of global industry leaders from wireless carriers, technology and content providers, agencies, and industry publications. Speaking on the occasion, Shashank Srivastava, Chief General Manager (Marketing), Maruti Suzuki said, “We are delighted to have played a leadership role in use of mobile media in India and bring this global recognition to India for the first time. This campaign was a result of our study of changing consumer behaviour that showed a significant increase in the consumption of sports related content on the mobile phones. Based on this, Maruti Suzuki launched this campaign to increase company’s association with sports and build greater affinity with its target audience on their medium of choice. In the traditional media as well, Sports is highly consumed by our target group- which is the growing population of younger people in the country.”
- HR LEADERSHIP CONCLAVE 2010
Playing a significant role in infusing innovation, generating superior ... How does the HR department firm up its plans? What are it resources and how ... Finance, IT & COSL), Maruti Suzuki India Limited; Mr. RS Dabas, ... Chairperson: Mr. Jacob Peter, Lead Consulting Advisor - People and Change Practice, KPMG ..
Human Resources Functional strategy, optimization & transformation:
With the complexity of business environment growing at an unprecedented pace, the precipice on which the HR community rests is getting deeper. It is actually testing times. Playing a significant role in infusing innovation, generating superior business value, enhancing the leadership quotient, building customer loyalty, facilitating market penetration has never been mission critical for HR any time before. How the HR departments determine and successfully respond to these challenges will play a key role in the ability of an organization to capitalize on growth opportunities. As the environment is becoming conducive for adding substantial share holder value, raising the overall performance capability of people has become a key factor for growth. For the first time, HR is going through baptism by fire. The only way to come out stronger and capable to deliver is by focusing on three interlinked aspects of performance: functional strategy, optimization & transformation. How does the HR department firm up its plans? What are it
resources and how should it see its way forward?
Key Points of Discussion
The need for realignment of priorities.
Share holder value and HR maturity model. How does human resources contribute to Business bottom line? Is the function dying from lack of line orientation?
Affle Clinches Two Prestigious MMA Global Awards For it’s Path Breaking Mobile Marketing Campaign for Maruti Suzuki on AirtelNov 23, 2010
New Delhi : Mobile media leader, Affle, today announced that it has won the Mobile
Marketing Association’s(MMA) Global & Asia Pacific Mobile Marketing Awards, for the best use of mobile media for
branding purposes. These awards were won for Affle’s advertising for Maruti Suzuki, India’s largest car maker, for a
path breaking campaign which helped Maruti leverage sponsorship of top sporting events on airtel’s mobile platform.
To win this award, Affle documented a two-month campaign using multiple mobile media platforms like Affle’s
SMS2.0, Mobile Internet, Voice Portals & SMS advertising.
The campaign was a result of Affle, airtel and Maruti Suzuki’s study of changing consumer behaviour, which showed
a significant increase in the consumption of sports related content on the mobile phone. Taking this key factor into
consideration a campaign to increase Maruti Suzuki’s association with sports and to build greater affinity with its
target audience on their medium of choice was created. The uniqueness, scale and results for this campaign ensured
that it became the first Indian entry to win this award for the global category at the MMA.
“We are very pleased to receive this global recognition from the MMA for our work with Maruti Suzuki,” said Anuj
Kumar, Executive Director (South Asia), Affle. “We have always believed that mobile is the new mass media, and if
strategized & executed well, mobile campaigns can deliver significantly better results than other mass media. For this
particular campaign we integrated the brand experience across multiple mobile touch points and ensured that the
campaign reached to millions of users delivering unprecedented engagement levels. With over 1.2 Mn engagements,
a 7% CTR (Click Through Rate), and over 33% increase in Top of Mind awareness, this campaign today stands as a
great global case study on how mobile can be used effectively for brand building in a very scalable way”
“We are tremendously proud to have won this prestigious marketing award and delighted to have played a leadership
role in the evangelising the use of mobile media in India,” said Sunila Dhar, Asst. General Manager, Maruti Suzuki.
“Sports has been an important genre of advertising and of great relevance to our TG. Combining sports with the
digital medium has given us these stupendous results. We really value our partnership with Affle as they have always
brought to us the most cutting edge mobile communication products and solutions which have helped us connect
better with our target group. This particular campaign has been a great success for us as it helped build affinity &
engagement with our target audience and was instrumental in helping us significantly up our Awareness & Top of
Mind scores though a clutter breaking communication. We also received over 30,000 test drive requests as a result
which was a clear bonus from this branding activity.“
“It is now a well known fact that when it comes to innovation in mobile, the entire world is looking to the Asia Pacific
region on how to do it right,” said Rohit Dadwal, Managing Director, Mobile Marketing Association Asia Pacific
Limited. “With a market and consumer environment that is conducive to tremendous growth in this field, the APAC
region will continue to fascinate the world with its dazzling applications of mobile technology. Innovation in the region
is being spearheaded by such technologically advanced markets such as Japan, Singapore, Hong Kong, South
Korea etc. In addition, there are several developing nations that have growing populations and low PC penetration
rates making mobile their primary choice for web access and related services.”
Maruti Suzuki: Buy
The company’s formidable array of products not only shielded it from the slowdown in demand last year but also helped expand its market leadership in the A2 and A3 car segments.
S. Hamsini Amritha
The stock of Maruti Suzuki is one of the outperformers in the BSE Sensex basket over the past year. But the stock remains a preferred exposure to capitalise on the recovery in automobile sales. Though concerns about a deficient monsoon and a slowdown in exports next year have tended to impact the stock’s performance in recent weeks, the company appears well placed to weather both risks and still deliver strong growth.
Investors with a moderate return target (10-15 per cent) can consider buying the stock currently at Rs 1467. This translates into a PE multiple of 32 times trailing 12-month earnings, but one should keep in mind that earnings for the company remained depressed for most part of last year.
The company’s formidable array of products not only shielded it from the slowdown in demand last year but also helped expand its market leadership in the A2 and A3 car segments. The strong financial performance despite the input cost continuing to remain stiff is yet another comforting factor for investors. However, given the way the stock price has shot up in recent times, it may be ambitious to expect big returns in the near future.
Line ‘em up
From enjoying a 51.3 per cent market share in the A2 segment in 2007-08, Maruti Suzuki saw its market share dipping to 46.8 per cent last year. However, the launch of A-Star and Ritz has helped Maruti quickly regain lost ground and its market share now stands at 53.3 per cent in the A2 segment. This apart, the company also holds leadership in the A3 or the entry-level sedan segment, with models such as the SX4 and Swift Dzire keeping demand buoyant. Maruti’s market share in this segment is 42.7 per cent.
Though Tata Nano was perceived to be a big threat to Maruti initially, by taking away entry-level car buyers, concerns on this front have been reduced by the fact that most of the bookings for the Tata Nano have been for its high-end variant.
With the price differential between high end Nano variants and Maruti’s basic Alto quite narrow, a drastic shift to the former appears unlikely. Diesel cars, which are grabbing an increasing share of the A2 and A3 car segments, may
have also helped the company maintain its position, given that Maruti’s top selling models such as Swift, A-Star, Ritz and Swift Dzire come in diesel variants.
Year 2010 may see the unveiling of Suzuki Kizashi in India. This will mark the company’s entry in the premium sedan or the A4 segment. Given that Kizashi is pitched against cars such as Toyota Corolla Altis, Honda City and Skoda Octavia, breaking into this segment may take time.
With small cars hogging the limelight world over, Maruti plans to expand its production capacities and invest more on its research and development activities. The company will deploy Rs 1,000 -Rs 1,500 crore, for the R&D unit with a dedicated suppliers’ park and test-track in Rohtak. The company’s low debt:equity ratio and annual cash flows of over Rs 1,000 crore from operations, suggest that the funding may not impose much of a burden. The recently developed Manesar plant will see an increase in its production capacity, as the company proposes to gradually shift some of its output from the Gurgaon plant.
Some concerns
Rural and semi-urban demand played a crucial role in Maruti weathering a tough market last year. Currently rural and semi urban markets contribute 12 per cent of the company’s total sales. While the deficient monsoon may impact rural sales temporarily, this impact is likely to offset by improved agricultural credit, the NREGA programme and accelerated government spending on rural infrastructure projects.
The payment of the second tranche of Pay Commission arrears over the next couple of months, combined with currently low interest rates, may also give a renewed boost to urban demand.
Exports account for 10 per cent of the company’s total sales and have been a growth driver for Maruti in recent months.
At present, over 90 per cent of the cars are shipped to Europe. This trend may sustain till December 2009 or possibly till March 2010, aided by the scrappage incentives currently being offered by Governments in many European countries.
However, Maruti may face some uncertainty next fiscal, once these incentives are withdrawn. The company’s strategy of expanding its target markets into Australia, West Asia and parts of Latin America may help reduce a huge blip in exports.
Financial overview
The first quarter of FY-10 saw the company deliver strong profit growth after closing the previous fiscal year with a 30 per cent profit decline. Aided by excise duty cuts, net sales grew by 34 per cent, while net profit expanded by 25 per cent.
In terms of risks, the company will continue to face operating cost pressures, as the cost of raw materials such as, aluminium alloys and rubber have gone up by more than 50 per cent from their lows. A change in product mix in favour of diesel variants will also add to cost. A sharp upward spiral in interest rates may also curb demand in the hatchback segment.
Plan for change_____________________________\
Maruti plans a ‘Made in India’ Kizashi
Maruti India is finally set to shift its focus from entry level
hatchbacks and saloons to more premium cars. Maruti tried to capture this segment earlier as well
with the Vitara but failed miserably.
Now, it is all set to launch the new Kizashi in the Indian market by year end.
Maruti Suzuki, always considered an expert in the small car with 7 offerings in the segment, will have
to change its image for their premium offering – the Kizashi.
Priced around Rs 17 lakh – Rs 24 lakh, the new car will go head to head with Honda Accord, the Toyota
Camry and the Skoda Superb with a 2.4-liter petrol engine.
A Maruti Suzuki official -
We will get the confidence to make the sedan here only when we generate adequate sales volumes
from the CBUs and CKDs. We do have a plan, but there is a long time to it
But initially the Kizashi will be brought to Indian shores in the form of a CBU which means the base
price is already pushed up by more than 100 per cent (including countervailing duties, education cess
and other levies).
If it generates adequate sales volumes, the strategy is to shift from CBU to CKD. But CKDs will also
attract a 60% duty. The rising yen cost is providing no relief either.
In order to counter these factors the company has a long term plan to manufacture Kizashi in India in
its Manesar plant.
Read more: http://indianautosblog.com/2010/11/maruti-plans-a-%e2%80%98made-in-india%e2%80%99-kizashi#ixzz3q97m7I9K
Maruti Udyog Limited ? Managing Competition Successfully
MARUTI UDYOG LIMITED – Managing competition successfully
Maruti Udyog Limited (MUL) was established in Feb 1981 through an Act of Parliament, to meet
the growing demand of a personal mode of transport caused by the lack of an efficient public
transport system. It was established with the objectives of – modernizing the Indian automobile
industry, producing fuel efficient vehicles to conserve scarce resources and producing indigenous
utility cars for the growing needs of the Indian population. A license and a Joint Venture agreement
were signed with the Suzuki Motor Company of Japan in Oct 1983, by which Suzuki acquired 26% of
the equity and agreed to provide the latest technology as well as Japanese management practices.
Suzuki was preferred for the joint venture because of its track record in manufacturing and selling
small cars all over the world. There was an option in the agreement to raise Suzuki’s equity to 40%,
which it exercised in 1987. Five years later, in 1992, Suzuki further increased its equity to 50%
turning Maruti into a non-government organization managed on the lines of Japanese management
practices.
Maruti created history by going into production in a record 13 months. Maruti is the highest volume
car manufacturer in Asia, outside Japan and Korea, having produced over 5 million vehicles by May
2005. Maruti is one of the most successful automobile joint ventures, and has made profits every year
since inception till 2000-01. In 2000-01, although Maruti generated operating profits on an income of
Rs 92.5 billion, high depreciation on new model launches resulted in a book loss.
How did the organization plan and strategize the entire change_________________________________
Cover Story - The Inside Out Strategy
Is Cover Story - The Inside Out Strategy
Apr 1st 2010
By Tejasvi Mohanram & Ester Martinez
Emerging economies today present a complex landscape of immense opportunity, disruptive
low-cost innovation and rapid power shifts, in the backdrop of hitherto unknown constraints
and cut throat competition. People Matters spoke to thought leaders in industry and
academia about how business leaders can thrive by viewing their business less in terms of
products, services or processes and more in terms of delivery capability & competencies –
known and hidden – within their organizations.
Few companies and individuals epitomize Indian business success as Reliance Industries and
Dhirubhai Ambani. Armed with phenomenal business acumen, impeccable execution and
fund-raising abilities, Dhirubhai built Reliance into a business empire worth more than 100
billion dollars in a period of just 40 years. Undoubtedly one of the greatest success stories in
corporate history from any part of the world and an unparalleled blaze of wealth creation.
A closer examination at these 40 years reveals a familiar style by which Dhirubhai ‘out-
strategized’ the competition – Reliance would enter an industry with excess capacity and
world-class technology, and then mop up all excess demand in the industry by providing the
best quality product at the lowest industry margins.
While this strategy per se was potentially replicable, number of companies including public
sector companies tried to achieve low costs by putting up high-scale plants… and failed.
Reliance’s strategy worked because it was anchored in outstanding competencies. Reliance
demonstrated the best project management abilities and it still is a champion in executing
large-scale complex projects. The company virtually pioneered raising low-cost capital from
broad-based equity markets in India and abroad. Further, it could manage the regulatory
environment, partly through an extensive network and system for gathering and interpreting
information — a key but often overlooked component. And it could move fast. These core
competencies allowed Reliance to set up its world-class plants of scale at the lowest capital
costs of any company in India.
Clearly, Reliance’s growth spiral was built on an iterative process. Its competencies in
project management, finance mobilisation and influencing the regulatory environment
supported its high volume, low-cost strategy built on creating mega capacities. Each large-
scale project, in turn, allowed it to invest more in and deepen those competencies, thus
preparing the company for even larger projects and greater cross-functional coordination.
While most can see the value in Dhirubhai’s strategy, the significance of deep-rooted
market-beating competencies at Reliance, around which the strategy was woven, is often
overlooked. And herein lies a strong message for business leaders today. In a period of
phenomenal opportunity and cut-throat competition, managers who are able to build
generic, value-creating capabilities within their organizations and leverage on them with
relentless market focus, stand a great chance of creating dominant industry players which
exploit bulk of growth opportunities.
The idea of Core Competence as an Inside-out strategy was first put forth by Hamel and
Prasad in 1990, when they outlined what makes up the concept of core competence – It
provides customer benefits, is hard for competitors to imitate and can be leveraged across
products and markets.
Competitive advantage comes not from imitation but from using organizational processes
and design to identify emerging competencies and build them into capabilities. Again, such
disproportionate, asymmetric, advantages are hard-to-imitate ways in which an organization
differs from its rivals—differences that could ultimately bring huge economic benefit. They
may consist of outputs (such as complex project execution that infrastructure leader L&T
can deliver), relationships and alliances (such as Tata Group’s network/contacts spanning
generations, industries and countries), processes, nascent skills and knowledge (as with BPO
sector leader Genpact)—provided competitors cannot imitate these within practical time and
cost constraints. In fact, such competencies, because of their subtlety or uniqueness, confer
a head start and discourage imitation, and give the company a sustainable edge over
competitors.
Increasingly, the competencies that afford companies such sustainable edge over rivals are
moving from the realm of tangibles to intangibles. Over the last couple of decades, many of
the traditional tangible sources of
competitive advantage – technology, access to capital and product development have
become commoditized in most industries and, the source of competitive advantage has
shifted to the intangible strengths of an organization like organizational speed, culture and
people. S.Y. Siddiqui, Managing Executive Officer – Administration (HR, Finance & IT) at auto
giant Maruti Suzuki, emphasises this importance of intangibles. “Competitive edge will
emerge from intangibles like speed, responsiveness, commitment and people excellence. In
the past, core competency used to emerge from tangibles like technology, product road-
map, quality control etc. Today, all these tangibles are replicable by competitors across the
world. You cannot really replicate intangibles because there is a high level of ambiguity on
how they are built”, he says.
Paradoxically, a continuous and intimate connection with the market and with customers is
vital for the Inside-out strategy. First, companies have to understand the competition in
order to know how they are unique. More
importantly, they need to track customer reactions to discover which competencies are
relevant. It is this ability to constantly leverage on the intersection between the company’s
emerging competencies and the opportunities in the marketplace that is the fundamental
strength of organizations based on capabilities.
Dr. Pritam Singh, Professor of Eminence, MDI elaborates “Inside must be linked and re-
aligned as many times as required with the outside for it to be a competitive strength. What
differentiates successful leaders and organizations is that they are able to ‘begin with the
end’; they are able to look around, look beyond and look within at the same time. Those
leaders are able to hear the unheard sounds, they can see the unobvious and they can
synthesise purpose by combining the outside and the inside.”
In this context, it becomes crucial for leaders and organizations to constantly look for
emerging competencies, shortlist ones that could be built into market-beating capabilities,
nurture these by building organizational structures and processes around them and finally,
pursue market opportunities that build and leverage on these capabilities. And even more so
for large organizations.
‘Discovering’ Competencies
To do well, companies need to develop important capabilities or resources that their rivals
cannot. It is, however, hard for them to develop these resources unless they already have
some realized or potential edge. The first step lies in discovering the competencies that
underlie that edge.
Phanish Puranam, Professor of Strategy, London Business School, explains this succinctly
“Capabilities can be built up by design but some emerge through serendipity. A call centre
may discover that in analyzing call volume, they have the seedling of a data analytics
capability. An IT outsourcer may find that they have learnt enough about their client’s
business to be able to offer business consulting advice. This happens all the time, because
what people learn and how this knowledge will prove useful is difficult to anticipate
perfectly. But being able to see it when it happens is vital as it can form the basis for
differentiation within the same business or diversification into a new one.”
A good place to begin the search for internal competencies is to find the more obvious
external ones—the reasons why clients and business gravitate to a company rather than its
competitors. Managers might look for the kinds of opportunities they can capture that their
competitors cannot and vice versa. Robert Kaplan, Professor of Management Practice at
Harvard University, is a firm believer in the importance of talking to clients for identifying
competencies. “The most important way to identify competitive advantage is to look
outwards…talk to customers”, he says. “If you understand why customers chose you to do
business with over competitors, you have the most accurate response to the competency
question. Customers are like a mirror to the organization and companies can very easy let
their advantage slip by not being close to their customers.”
Tiger Tyagarajan, COO at Business Process Outsourcing major Genpact, explains this
process of getting customer feedback. “We have many processes and mechanisms that
allow us to get ‘outside-in feedback’…we do
rigorous customer feedback processes…net promoter scores from about 2500 customer
touch points globally every 6 months. We have done this for 10 years without a break. The
learnings from this and other win-loss analysis when our leaders talk to customers when we
win or lose business, are tremendous.”
Competence search could also take place inside a company. In many cases, the most useful
‘asymmetries’ are buried deep within the organization and have to be traced back from
surface level abilities. This identication can take place by spotting pre-existing but
unexploited assets or in an evolutionary manner that requires managers to recognize an
emerging edge, mostly in intangible assets such as knowledge, relationships, and
reputation.
Maruti Suzuki’s evolution into a company known for superior after-sales service and its
developing a comprehensive customer service network over the last decade began with
both an inward and outward search. In 2000, the company acknowledged the need to
capture a greater portion the total lifetime value of cars it sold, as more and more
customers began changing cars at shorter intervals. The company recognized its edge, in
terms of scale, for providing a nation-wide servicing network and started building on its
existing service station base with a focus on developing superior maintenance services. A
decade of effort later, Maruti Suzuki today has an extensive network of more than 2500
service stations covering 1200 cities, which it plans to expand by 45% over the next 3 years.
This strategic expansion has helped Maruti Suzuki to capture a huge portion of the
maintenance market and today allows the company to compete not just on the basis of
product and price, but also on the basis of superior after-sales service.
Nurturing capabilities
Competencies evolve into sustainable core capabilities largely through organizational
design, which builds and supports capabilities by embedding people and processes into a
cohesive conguration. This involves a combination of aligning people to leverage on the
competencies using the right reward structures, creating feedback mechanisms to reinforce
organizational understanding of competencies and institutionalizing knowledge through
learning and development.
Organizational structure is the key to creating and sustaining capabilities according to Dave
Ulrich, co-founder of RBL Group. “Line managers are ultimately owners of the organization
choices. HR professionals are architects who offer insights and advice. Organizations should
be designed around capabilities, what they are known for by their customers”, he adds.
In general, aligning behaviour with core competencies is a key challenge in innovation-
driven companies. Nathaniel Sasikar, Vice President, HR at 3M explains how the right reward
structure can drive such behaviour – “High performance is a result of organizational
alignment through business processes. For example, new product sales is a key
performance measure for all our sales employees. This ensures that there is a hunger and
support for selling new products, which in turn keeps the labs busy in creating more new
products. Thus we continue to innovate and invest in our people.”
At the heart of nurturing capabilities is the ability to create an organization that is capable of
firmly capturing the essence of any competency and making it more valuable to the
organization than to its competitors. A case in point is engineering and project management
blue chip, Larsen & Toubro, which has managed to leverage on its project management
capabilities to an extent that today, the company has little competition when to comes to
the execution of mission-critical, capital-intensive, hi-tech infrastructure projects. U.
Dasgupta, Executive Vice President and Operating Company (OC) Head Electrical and
Automation OC at L&T, elaborates on how the company reinforces the understanding of key
competencies. “Balancing between action and reflection is an ongoing exercise and we have
many mechanisms to encourage this balance. We run learning sessions once the projects
have been completed to explore the learning opportunities from each project. We also use
cross functional teams extensively, to study past and current projects on how we can
execute better, faster and cheaper.”
Ultimately, this process of designing structures, processes and policies with the objective to
nurture and institutionalize competencies is what results in the DNA of an organization. The
right DNA for an organization is capable of creating ‘virtuous spirals’ - a cycle of capability
and aligned performance that enhances reputation, brings opportunities and creates
resources to ultimately plough back into capability development. Organizational structure
and design serve as a powerful tool in disseminating the capability within the organization
and in leveraging the capability across the right market opportunities.
What business are you in?
Arjun Singh, Asia Managing Director for Outsourcing - Global Business Services and
Technology, at Hewitt Associates recollects the large number of instances when market
leaders fail to recognize their core offering, like when Pepsi and Coke took a good many
years to realize their business was beverages and not colas – an oversight that saw them
lose significant market share to iced teas, milk, juice and dairy brands. Noting that
companies with a strong ‘core’ withstood the recession better, he adds, “The market pushes
companies to understand what their core offerings are and what they do better than anyone
else can. Companies need to pick their core, and the market will punish or reward their
competitive positioning. In an ironic way, the recession of 2008-09 has really helped speed
up this process because companies have had to understand which parts are still crucial and
which ones that they can give away, or outsource to be able to build on their core
capabilities”.
The market can be viewed as a set of niches and opportunities that a company must choose
from to leverage its capabilities in the most effective manner. Fundamental to this is a deep-
rooted understanding of what the
company’s core competencies are and where can these competencies be utilized for
maximum economic benefit.
The ITC story of the last few decades has been one of a company that was pushed to pick its
core offering carefully due to market conditions – operating as they originally were in one of
the most persecuted industries in the world. Over the last 3 decades, the company has
diversified into hotels, packaging, food, agri-business and apparel, with a clear
understanding that the core competency of the business is its depth of distribution, its
brand-building capabilities, raw material sourcing and managing outsourced activities. In
effect, what seems like an unrelated diversification into FMCG, agri-commodities and apparel
is an application of the company’s capabilities to a new product sector.
In effect, a company’s business is not defined by the products, services it offeres or even by
the processes followes, but by a much more rich and complex definition of what the
organization is capable of delivering. This is also the central thesis behind the growing trend
of outsourcing non-core activities – companies that truly understand their core
competencies can outsource non-critical activities and derive benefits both in terms of
reduced costs and increased organizational focus.
S C Bhargava, Executive Vice President and Head, Electrical and Automation Operating
Company at L&T, explains this from the perspective of his industry. “Outsourcing is used in
two areas, either you are looking at taking an advantage in terms of differential costs in any
given area or you are looking at building upon the strength of your outsourcing partner, as
an alliance to build on their expertise. The latter one might not be cheaper but it provides a
higher output and creates opportunities for improvement. In our case, customer centricity
and excellence in execution are paramount… wherever we are able to ensure that quality is
maintained or improved we would look at using partners.”
At the end of the day, the Inside-out strategy is all about identifying the company’s core
competencies for which customers are willing to pay and continue doing business, followed
by a relentless pursuit of opportunities in the market place where these competencies can
be leveraged. It also entails constantly looking for emerging competencies within the
organization that can exploit our view of external opportunities and nurturing them by
aligning people, creating feedback mechanisms and institutionalizing knowledge.
The imperative for leaders, senior managers and HR professionals is to continuously map
the external world of customers & opportunities with the internal world of capabilities and
manage change with the firm knowledge that their company’s business is not defined by the
products and services it delivers, but
by the core delivery capability of their organization.
Evaluation ______________________________________________
OMPANY HISTORY AND BACKGROUND
The Evolution
Maruti’s history of evolution can be examined in four phases: two phases during pre-liberalization period (1983-86, 1986-1992) and two phases during post-liberalization period (1992-97, 1997-2002), followed by the full privatization of Maruti in June 2003 with the launch of an initial public offering (IPO).The first phase started when Maruti rolled out its first car in December 1983. During the initial years Maruti had 883 employees, a capital of Rs. 607 mn and profit of Rs. 17 mn without any tax obligation. From such a modest start the company in just about a decade (beginning of second phase in 1992) had turned itself into an automobile giant capturing about 80% of the market share in India. Employees grew to 2000 (end of first phase 1986), 3900 (end of second phase 1992) and 5700 in 1999. The profit after tax increased from Rs 18.67 mn in 1984 to Rs. 6854.54 mn in 1998 but started declining during 1997-2001.
During the pre-liberalization period (1983-1992) a major source of Maruti’s strength was the wholehearted willingness of the Government of India to subscribe to Suzuki’s technology and the principles and practices of Japanese management. Large number of Indian managers, supervisors and workers were regularly sent to the Suzuki plants in Japan for training. Batches of Japanese personnel came over to Maruti to train, supervise and manage. Maruti’s style of management was essentially to follow Japanese management practices.
The Path to Success for Maruti was as follows:
(a) teamwork and recognition that each employee’s future growth and prosperity is totally dependent on the company’s growth and prosperity (b) strict work discipline for individuals and the organization (c) constant efforts to increase the productivity of labor and capital (d) steady improvements in quality and reduction in costs (e) customer orientation (f) long-term objectives and policies with the confidence to realize the goals (g) respect of law, ethics and human beings. The “path to success” translated into practices that Maruti’s culture approximated from the Japanese management practices.
Maruti adopted the norm of wearing a uniform of the same color and quality of the fabric for all its employees thus giving an identity. All the employees ate in the same canteen. They commuted in the same buses without any discrimination in seating arrangements. Employees reported early in shifts so that there were no time loss in-between shifts. Attendance approximated around 94-95%. The plant had an open office system and practiced on-the-job training, quality circles, kaizen activities, teamwork and job- rotation. Near-total transparency was introduced in the decision making process. There were laid-down norms, principles and procedures for group decision making. These practices were unheard of in other Indian organizations but they worked well in Maruti. During the pre- liberalization period the focus was solely on production. Employees were handsomely rewarded with increasing bonus as Maruti produced more and sold more in a seller’s market commanding an almost monopoly situation.
INDUSTRY ANALYSIS
GLOBAL FOUR WHEELER INDUSTRY
Evolution
The automobile industry has undergone significant changes since Henry Ford first introduced the assembly line technique for the mass production of cars. Production concepts, processes and the associated technologies have changed dramatically since the first cars were built. Some 70 years ago, car assembly was primarily manual work. Today, the process of car assembly is almost fully automated. In the old days, firms attached importance to the production of virtually every part in a single plant, while today, carmakers concentrate on only a few specific production stages (i.e. car assembly). Parts and module production, services and related activities have been shifted to other, specialised firms (outsourcing of production steps).Since the 1980s, it has become clear that further productivity gains to retain competitiveness can be possible only by outsourcing and securing greater flexibility. For example, firms, especially small car producers whose markets have been threatened by imports, have diversified their production programmes (e.g. by building off-road cars or convertibles) thereby introducing greater flexibility in the production process. Also, firms and their production have become more internationalized in lieu of outsourcing.
Current Scenario
The global passenger car industry has been facing the problem of excess capacity for quite some time now. For the year 2002, the global capacity in the automotive industry was 75 million units a year, against production of only 56 million units (excess capacity estimated at 25%). Efforts to shore up capacity utilization have prompted severe price competition, thus affecting margins and forcing fundamental changes in the industry. The pressure on sales and margins is driving players to emerging markets in pursuit of better growth opportunities and/or access to low-cost manufacturing bases.
• The concept of selling in the passenger car industry is changing from original sales towards lifecycle value generation, encompassing financing, repairs & maintenance, cleaning, provision of accessories, and so on.
• Vehicle manufacturers are moving into completely new materials and technologies—partly guided by environmental legislation—in striving to come up with radically different products. Some of these new technologies involve parts that can be bolted on to an existing vehicle with relatively few implications for the rest of the vehicle. Others are much more fundamental, and are likely to have a profound impact throughout the supply chain. The examples include battery, electric or hybrid power trains, and alternatives to the all-steel body. Carmakers are increasingly outsourcing component production, and focusing on product design, brand management and consumer care, in contrast to the traditional emphasis on manufacturing and engineering.
• The increasing need to attain global scales underscores the importance of platform sharing among carmakers. All original equipment manufacturers (OEMs) are trying to reduce the number of vehicle platforms, but raise the number of models produced from each platform. This means producing a number of seemingly distinct models from a common platform.
• As in manufacturing, distribution in the automobile industry is undergoing significant changes, involving Internet use, retailer consolidation, and unbundling of services provided by retailers.
INDIAN FOUR WHEELER INDUSTRY
Evolution
The Indian automobile industry developed within the broader context of import substitution during the 1950s. The distinctive feature of the automobile industry in India was that in line with the overall policy of State intervention in the economy, vehicle production was closely regulated by an industrial licensing system till the early 1980s that controlled output, models and prices. The cars were built mostly by two companies, Premier Automobiles Limited and HM. However, the Indian market got transformed after 1983 following the relaxation of the licensing policy and the entry of MUL into the car market. In 1991, car imports were insignificant, while component imports were equivalent to 20% of the domestic production, largely because of the continuing import of parts by MUL. The liberalization of the Indian automotive industry that began in the early 1990s was directed at dismantling the system of controls over investment and production, rather than at promoting foreign trade. Multinational companies were allowed to invest in the assembly sector for the first time, and car production was no longer constrained by the licensing system. However, QRs on built-up vehicles remained and foreign assemblers were obliged to meet local content requirements even as export targets were agreed with the Government to maintain foreign exchange neutrality. The new policy regime and large potential demand led to inflows of foreign direct investment (FDI) by the mid-1990s. By the end of 1997, Daewoo, Ford India, GM, DaimlerChrysler and Peugeot had started assembly operations in India. They were followed by Honda, HMIL, and Mitsubishi.
Current Scenario
Major Players
Bajaj Tempo Limited, DaimlerChrysler India Private Limited, Fiat India Automotive Private Limited, Ford India Limited, General Motors India Limited, Hindustan Motors Limited, Honda Siel Cars India Limited, Hyundai Motor India Limited, Mahindra & Mahindra Limited, Maruti Udyog Limited, Skoda Auto India Limited, Tata Motors Limited, Toyota Kirloskar Motors Limited.
Current scenario in Passenger Car Category
The dominant basis of competition in the Indian passenger car industry has changed from price to price-value, especially in the passenger car segment. While the Indian market remains price sensitive, the stranglehold of Economy models has been slackening, giving way to higher-priced products that better meet customer needs. Additionally, a dominant trend in the Indian passenger car segment is the increasing fragmentation of the market into sub-segments, reflecting the increasing sophistication of the Indian consumer. With the launch of new models from FY2000 onwards, the market for MUVs has been redefined in India, especially at the upper-end. Currently, the higher-end MUVs, commonly known as Sports Utility Vehicles (SUVs), occupy a niche in the urban market, having successfully shaken off the tag of commercial vehicles attached to all MUVs till recently. Domestic car manufacturers are now venturing into areas such as car financing, leasing and fleet management, and used-car reconditioning/sales, to complement their mainstay-business of selling new cars.
COMPETITIVE FORCES IN INDIAN PASSENGER CAR MARKET
Critical Issues and Future Trends
The critical issue facing the Indian passenger car industry is the attainment of break-even volumes. This is related to the quantum of investments made by the players in capacity creation and the selling price of the car. The amount of investment in capacities by passenger car manufacturers in turn depends on the production
Threat from the new players: Increasing
· Most of the major global players are present in the Indian market; few more are expected to enter.
· Financial strength assumes importance as high are required for building capacity and maintaining adequacy of working capital.
Access to distribution network is important.
Lower tariffs in post WTO may expose Indian companies to threat of imports.
Rivalry within the industry: High
· There is keen competition in select segments. (compact and mid size segments).
· New multinational players may enter the market.
Market strength of suppliers: Low
A large number of automotive components suppliers.
Automotive players are rationalizing their vendor base to achieve consistency in quality.
Market strength of consumers: Increasing
· Increased awareness among consumers has increased expectations. Thus the ability to innovate is critical.
· Product differentiation via new features, improved performance and after-sales support is critical.
· Increased competitive intensity has limited the pricing power of manufacturers.
Threat from substitutes: Low to medium
With consumer preferences changing, inter product substitution is taking place (Mini cars are being replaced by compact or mid sized cars).Setting up integrated manufacturing facilities may require higher capital investments than establishing assembly facilities for semi knocked down kits or complete knocked down kits. In recent years, even though the ratio of sales to capacity (an important indicator of the ability to
reach break-even volumes) of the domestic car manufacturers have improved, it is still low for quite a few car manufacturers in India. India is also likely to increasingly serve as the sourcing base for global automotive companies, and automotive exports are likely to gain increasing importance over the medium term. However, the growth rates are likely to vary across segments. Although the Mini segment is expected to sustain volumes, it is likely to continue losing market share; growth in the medium term is expected to be led largely by the Compact and Mid-range segments. Additionally, in terms of engine capacity, the Indian passenger car market is moving towards cars of higher capacity. This apart, competition is likely to intensify in the SUV segment in India following the launch of new models at competitive prices.
Read more: http://www.articlesbase.com/marketing-articles/maruti-udyog-limited-managing-competition-successfully-723310.html#ixzz3qE02whAW Under Creative Commons License: Attribution
What OD interventions did the organization choose in the entire process and how were they implemented_______________________
The Path to Success for Maruti was as follows:
(a) teamwork and recognition that each employee’s future growth and prosperity is totally dependent
on the company’s growth and prosperity (b) strict work discipline for individuals and the organization
(c) constant efforts to increase the productivity of labor and capital (d) steady improvements in
quality and reduction in costs (e) customer orientation (f) long-term objectives and policies with the
confidence to realize the goals (g) respect of law, ethics and human beings. The “path to success”
translated into practices that Maruti’s culture approximated from the
Japanese management practices.
Maruti adopted the norm of wearing a uniform of the same color and quality of the fabric for all its
employees thus giving an identity. All the employees ate in the same canteen. They commuted in the
same buses without any discrimination in seating arrangements. Employees reported early in shifts
so that there were no time loss in-between shifts. Attendance approximated around 94-95%. The
plant had an open office system and practiced on-the-job training, quality circles, kaizen activities,
teamwork and job- rotation. Near-total transparency was introduced in the decision making process.
There were laid-down norms, principles and procedures for group decision making. These practices
were unheard of in other Indian organizations but they worked well inMaruti. During the pre-
liberalization period the focus was solely on production. Employees were handsomely rewarded with
increasing bonus asMaruti produced more and sold more in a seller’s market commanding an almost
monopoly situation
KEY STRATEGIC INITIATIVES BY MARUTI
A) TURNAROUND STRATEGIES MARUTI FOLLOWED
Maruti was the undisputed leader in the automobile utility-car segment sector, controlling about
84% of the market till 1998. With increasing competition from local players like Telco, Hindustan
Motors, Mahindra & Mahindra and foreign players like Daewoo, PAL, Toyota, Ford, Mitsubishi, GM,
the whole auto industry structure in India has changed in the last seven years and resulted in the
declining profits and market share for Maruti. At the same time the Indian government permitted
foreign car producers to invest in the automobile sector and hold majority stakes.
In the wake of its diminishing profits and loss of market share, Maruti initiatedstrategic responses
to cope with India’s liberalization process and began toredesign itself to face competition in the
Indian market. Consultancy firms such as AT Kearney & McKinsey, together with an internationally
reputed OD consultant, Dr. Athreya, have been consulted on modes of strategy and organization
development during the redesign process. The redesign process saw Maruti complete a Rs. 4000 mn
expansion project which increased the total production capacity to over 3,70,000 vehicles per
annum. Marutiexecuted a plan to launch new models for different segments of the market. In its
redesign plan, Maruti, launches a new model every year, reduce production costs by achieving 85-
90% indigenization for new models, revamp marketing by increasing the dealer network from 150 to
300 and focus on bulk institutional sales, bring down number of vendors and introduce competitive
bidding. Together with the redesign plan, there has been a shift in business focus of Maruti.
When Maruti commanded the largest market share, business focus was to “sell what we produce”.
The earlier focus of the whole organization was “production, production and production” but now the
focus has shifted to “marketing and customer focus”. This can be observed from the changes
in mission statement of the organization:
1984: “Fuel efficient vehicle with latest technology”.
1987: “Leader in domestic market and be among global players in the overseas market”.
1997: “Creating customer delight and shareholders wealth”.
Focus on customer care has become a key element for Maruti. IncreasingMaruti service stations
with the scope of one Maruti service station every 25 km on a highway. To increase its market
share, Maruti launched new car models, concentrated on marketing and institutional sales.
Institutional sales, which currently contributes to 7-8% of Maruti’s total sales. Cost reduction and
increasing operating efficiency were another redesign variable. Cost reduction is being achieved by
reaching an indigenization level of 85-90 percent for all the models. This would save foreign currency
and also stabilize prices that fluctuate with exchange rates. However, change in the mindset was not
as fast as required by the market. Maruti planned to reduce costs, increase productivity, quality and
upgrade its technology (Euro I&II, MPFI). In addition, it followed a high volume production of about
400,000 vehicles / year, which entailed a smooth relationship between the workers and the managers.
Post 1999, the market structure changed drastically. Just before this change,Maruti had wasted two
crucial years (1996-1998) due to governmental interventions and negotiation with Suzuki of Japan
about the break-up of the share holding pattern of the company. There was a change in leadership,
Mr. Sato of Suzuki became the Chairman in June 1998, and the new Mr.J. Khatter was appointed as
the new Joint MD. Khatter was a believer in consensus decision making and participative style
of management.As a result of the internal turmoil and the changes in the external
environment, Maruti faced a depleting market share, reducing profits, and increase in inventory
levels, which it had not faced in the last 18 years.
After their fall in market share they redesigned their strategies and through their parent company
Suzuki they learned a lot.The organizational 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 for the FY2002-2003.
B) CURRENT STRATEGIES FOLLOWED BY MUL
I. PRICING STRATEGY – CATERING TO ALL SEGMENTS
Maruti caters to all segment and has a product offering at all price points. It has a car priced at
Rs.1,87,000.00 which is the lowest offer on road. Maruti gets 70% business from repeat buyers who
earlier had owned a Maruti car. Their pricing strategy is to provide an option to every customer
looking for up gradation in his car. Their sole motive of having so many product offering is to be in
the consideration set of every passenger car customer in India. Here is how every price point is
covered.
II. OFFERING ONE STOP SHOP TO CUSTOMERS OR CREATING DIFFERENT REVENUE
STREAMS
Maruti has successfully developed different revenue streams without making huge investments in the
form of MDS, N2N, Maruti Insurance and Maruti Finance. These help them in making the customer
experience hassle free and helps building customer satisfaction.
Maruti Finance: In a market where more than 80% of cars are financed, Maruti has strategically
entered into this and has successfully created a revenue stream for Maruti. This has been found to be
a major driver in converting a Maruti car sale in certain cases. Finance is one of the major decision
drivers in car purchase. Maruti has tied up with 8 finance companies to form a consortium. This
consortium comprises Citicorp Maruti, Maruti Countrywide, ICICI Bank, HDFC Bank, Kotak
Mahindra, Sundaram Finance, Bank of Punjab and IndusInd Bank Ltd.( erstwhile-Ashok Leyland
Finance).
Maruti Insurance : Insurance being a major concern of car owners. Maruti has brought all car
insurance needs under one roof. Maruti has tied up with National Insurance Company, Bajaj Allianz,
New India Assurance and Royal Sundaram to bring this service for its customers. From identifying
the most suitable car coverage to virtually hassle-free claim assistance it’s your dealer who takes care
of everything. Maruti Insurance is a hassle-free way for customers to have their cars repaired and
claims processed at any Maruti dealer workshop in India.
True Value – Initiative to capture used car market
Another significant development is MUL’s entry into the used car market in 2001, allowing customers
to bring their vehicle to a ‘Maruti True Value’ outlet and exchange it for a new car, by paying the
difference. They are offered loyalty discounts in return.This helps them retain the customer. With
Maruti True Value customer has a trusted name to entrust in a highly unorganized market and where
cheating is rampant and the biggest concern in biggest driver of sale is trust. Maruti knows its
strength in Indian market and has filled this gap of providing trust in Indian used car market. Maruti
has created a system where dealers pick up used cars, recondition them, give them a fresh warranty,
and sell them again. All investments for True Value are made by dealers. Maruti has build up a strong
network of 172 showrooms across the nation. The used car market has a huge potential in India. The
used car market in developed markets was 2-3 times as large as the new car market.
N2N: Car maintenance is a time-consuming process, especially if you own a fleet. Maruti’s N2N Fleet
Management Solutions for companies, takes care of the A-Z of automobile problems. Services include
end-to-end backups/solutions across the vehicle’s life: Leasing, Maintenance, Convenience services
and Remarketing.
Maruti Driving School (MDS): Maruti has established this with the goal to capture the market
where there is inhibition in buying cars due to inability to drive the car. This brings that customer to
Maruti showroom and Maruti ends up creating a customer.
III. REPOSITIONING OF MARUTI PRODUCTS
Whenever a brand has grown old or its sales start dipping Maruti makes some facelifts in the models.
Other changes have been made from time to time based on market responses or consumer feedbacks
or the competitor moves. Here are the certain changes observed in different models of Maruti.
Omni has been given a major facelift in terms of interiors and exteriors two months back. A new
variant called Omni Cargo, which has been positioned as a vehicle for transporting cargo and meant
for small traders. It has received a very good response from market. A variant with LPG is receiving a
very good response from customers who look for low cost of running.
Versa prices have been slashed and right now the lowest variant starts at 3.3 lacs. They decreased
the engine power from 1600cc to 1300cc and modified it again considering consumers perception.
This was a result of intensive survey done all across the nation regarding the consumer perception of
Versa.
Esteem has gone through three facelifts. A new look last year has helped boost up the waning sales
of Esteem.
Baleno was launched in 1999 at 7.2 lacs. In 2002 they slashed prices to 6.4 lacs. In 2003 they
launched a lower variant as Baleno LXi at 5.46 lacs. This was to reduce the price and attract
customers.
Wagon-R was perceived as dull boxy car when it was launched. This made it a big failure on launch.
Then further modifications in engine to increase performance and a facelift in the form of sporty
looking grills on the roof. Now it’s of the most successful models in Maruti stable.
Zen has been modified four times till date. They had come up with a limited period variant called Zen
Classic. That was limited period offer to boost short term sales.
Maruti 800 has so far been facelifted two times. Once it came with MPFi technology and other time
it came up with changes in front grill, head light, rear lights and with round curves all around.
IV. CUSTOMER CENTRIC APPROACH
Maruti’s customer centricity is very much exemplified by the five times consecutive wins at J D Power
CSI Awards. Focus on customer satisfaction is what Maruti lives with. Maruti has successfully shed
off the public- sector laid back attitude image and has inculcated the customer-friendly approach in
its organization culture. The customer centric attitude is imbibed in its employees. Maruti dealers
and employees are answerable to even a single customer complain. There are instances of
cancellation of dealerships based on customer feedback.
Maruti has taken a number of initiatives to serve customer well. They have even changed their
showroom layout so that customer has to walk minimum in the showroom and there are norms for
service times and delivery of vehicles. The Dealer Sales Executive, who is the first interaction
medium with the Maruti customer when the customer walks in Maruti showroom, is trained on
greeting etiquettes. Maruti has proper customer complain handling cell under the CRM department.
The Maruti call center is another effort which brings Maruti closer to its customer. Their Market
Research department remains on its toes to study the changing consumer behaviour and market
needs.Maruti enjoys seventy percent repeat buyers which further bolsters their claim of being
customer friendly. Maruti is investing a lot of money and effort in building customer loyalty
programmes.
V. COMMITTED TO MOTORIZING INDIA
Maruti is committed to motorizing India. Maruti is right now working towards making things simple
for Indian consumers to upgrade from two-wheelers to the car. Towards this end, Maruti partnerships
with State Bank of India and its Associate Banks took organized finance to small towns to enable
people to buy Maruti cars. Rs. 2599 scheme was one of the outcomes of this effort.
Maruti expects the compact cars, which currently constitute around 80% of the market, to be the
engine of growth in the future. Robust economic growth, favorable regulatory framework, affordable
finance and improvements in infrastructure favor growth of the passenger vehicles segment. The low
penetration levels at 7 per thousand and rising income levels will augur well for the auto industry.
Maruti is busy fine-tuning another innovation. While researching they found that rural people had
strange notions about a car – that the EMI (equated monthly instalments) would range between Rs
4,000 and Rs 5,000. That, plus another Rs 1,500-2,000 for monthly maintenance, another Rs 1,000 for
fuel (would be the cost of using the car). To counter that apprehension, the company is working on a
novel idea. Control over the fuel bill is in the consumer’s hands. But, maintenance need not be. Says
Khattar: “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.”
VI. DISINVESTMENT AND IPO OF MARUTI UDYOG LIMITED
It was a long and tough journey, but a rewarding one at the end. A reward worth Rs 2,424 crore,
making it the biggest privatization in India till date. The size of Maruti’s sell- off deal is proof of its
success. On the investment of Rs 66 crore it made in 1982, when Maruti Udyog Limited (MUL) was
formally set up, the sale represents a staggering return of 35 times The best part of the deal is the Rs
1,000 crore control premium the Government has been able to extract from Suzuki Motor
Corporation for relinquishing its hold over India’s largest car company. Now looking at the strategy
point of it – for Suzuki, of course, complete control of MUL means a lot. Maruti is its most profitable
and the largest car company outside Japan. Suzuki will now be in the driver’s seat and will not have
to mind the whims and fancies of ministers and bureaucrats. “Decisions will now become quicker.
The response to changing market conditions and technological needs will be faster,” says Jagdish
Khattar, managing director, MUL. After the disinvestment Suzuki became the decision maker at
MUL. They flowed fund in India for the major revamp in MUL. Quoting from the report that appeared
in The Economic Times, 4th April 2005, -
The Indian car giant Maruti Udyog Limited has finalized its two mega investment plans — a new car
plant and an engine and transmission manufacturing plant. Both the projects will be implemented by
two different companies. At its meeting the company’s board approved a total investment of
Rs3,271.9 crore for these two ventures, which will be located in Haryana.
The above signifies when GOI was a major stakeholder in the MUL strategies which lead to
investment have had a bureaucracy factor in it but after the disinvestment strategy followed is a TOP
DOWN approach with a fast implementation.
Suzuki’s proposed two-wheeler facility in India, would start making motorcycles and scooters by the
end of 2005 through a joint venture, in which Maruti has 51 per cent stake. The two-wheeler unit will
have a capacity of 250,000 units a year.
The disinvestment followed by IPO gives the insight in the fact that now all the strategic decisions are
taken by Maruti Suzuki Corporation. Disinvestment had helped by removing the red tape and
bureaucracy factor from its strategic decision making process.
VII. REALISATION OF IMPORTANCE OF VEHICLE MAINTENANCE SERVICES 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. 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, how can I make sure that it comes back to me each
time it changes hands ? 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
everyday.
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.
VIII. PLAYING ON COST LEADERSHIP
Maruti is the price dictator in Indian automobile industry. It’s the low cost provider of car. The lowest
car on road is from Maruti stable i.e. Maruti 800. Maruti achieves this through continuous
improvements in operational efficiency and productivity.
The company has set itself (and its vendors) the target of a 50% improvement in productivity and a
30% reduction in costs in three years. The ability to keep lowering the prices sets Maruti apart from
other players in the league. Maruti spread the overheads over a larger base.
The impressive sales and profits were the result of major efforts within the company. Maruti also
increased focus on vendor management. Maruti consolidated its vendor base. This has provided its
vendors with higher volumes and higher efficiencies. Maruti does that by working with vendors,
assuring them that for every drop in price, volumes will go up. Maruti is now encouraging its vendors
to develop R&D capability for specialized components. Based upon such activities, product
competitiveness in the market will further increase.
Maruti also made strides in applying IT to manufacturing. A new Vehicle Tracking System improved
efficiency on the shop floor and enhanced quality control. The e Nagare system, adopted from Suzuki
Motor Corporation, smoothened Maruti’s Just In Time operations.
C) MAJOR FUTURE STRATEGIES
I. PHASING OUT ZEN IN 2007
The launch of Swift and phasing out Zen is a strategic move. Alto was launched keeping in mind that
it will take over Maruti 800 market in future. Perhaps being the flagship product phasing out of
Maruti 800 faced lots of resistance from dealers all over. Another reason behind not phasing out
Maruti 800 was the fear of brand shift of customers to other competitor’s product. Swift was
launched in May, 2005 in the price band starting from 4 lacs. Before launch of Swift Maruti
management had decided that they will phase out Zen since it had already came up with two
modifications. The major reason behind this decision was cannibalization of Wagon R and Swift due
to overlapping of price band. It is a rational decision to kill a product before it starts facing the
decline stage in product cycle. Maruti is offering Rs. 3000.00 more margins to dealer on the sale of
Wagon-R as compared to Zen. This is to let dealer push Wagon R instead of Zen.
II. MARUTI PLANS FOR A BIG DIESEL FORAY
The new car manufacturing company, called Maruti Suzuki Automobiles India Limited, will be a joint
venture between Maruti Udyog and Suzuki Motor Corporation holding a 70 per cent and 30 per cent
stake respectively. The Rs1,524.2 crore plant will have a capacity to roll out 1 lakh cars per year
with a capacity to scale up to 2.5 lakh units per annum. The new car manufacturing plant will begin
commercial production by the end of 2006.
Maruti would set up a diesel engine plant at Gurgaon in line with its plan to become a major player in
diesel vehicles in a couple of years. This has been done in the wake of major competition from Tata
Indica and meets the growing demand of diesel cars in India. While the annual growth in the diesel
segment was 13 per cent in the last three years, it was 19-20 per cent in the first quarter (April-June)
of the current fiscal. Maruti has currently an insignificant presence in diesel vehicle. It will
manufacture new generation CRDI (common rail direct injection) engines in collaboration with Fiat-
GM Opel and engines will be of 1200 cc. The plant with a capacity to produce one lakh diesel engines
would be operational in 2006. At present, Peugeot of France, supplies diesel engines for Maruti’s Zen
and mid-sized Esteem models. This will further reduce the imported component in Maruti vehicles,
making them more competitive in the Indian market.
III. MARUTI PLANS FOR A NEW ENGINE AND TRANSMISSION PLANT
The engine and the transmission plant will be owned by Suzuki Powertrain India Limited in which
Suzuki Motor Corporation would hold 51 per cent stake and Maruti Udyog holding the balance. The
ultimate total plant capacity would be three lakh diesel engines. However, the initial production
would be 1 lakh diesel engines, 20,000 petrol engines and 1.4 lakh transmission assemblies.
Investment in this facility will be Rs.1,747.7 crore. The commercial production will start by the end of
2006.
IV. INDIA AS EXPORT HUB FOR MARUTI
Three years back as an experiment, based on the increasing design capabilities of suppliers in
countries like India, McKinsey did an exercise to figure out just how much money could be saved if
automobiles were to be made in overseas locations like India, Mexico and South Africa – an
automobile BPO, so to speak. The result was staggering: the industry stands to gain $ 150 billion
annually in cost savings, and an additional $ 170 billion annually in new revenues once demand
shoots up following the drop in prices, and the combination of which means a 25 per cent increase in
existing revenue levels.
According to the study, over 90 per cent of automobiles today are sold in the countries they are made
in, so there’s a lot of money to be made by shifting the production overseas. Till recently, just 100,000
cars produced in low-cost countries were exported to high-cost ones – presumably this figure is going
up now that Altos from Maruti, Santros from Hyundai, Indicas from Tata Motors, and Ikons from
Ford, among others, are being regularly exported out of India.
Yet, as McKinsey points out, since it just costs $ 500 and just three weeks (and both figures are
falling) to ship out a car to anywhere in the world, why produce cars in high-wage islands? If a car
was produced in India instead of in Japan, the study says, it will cost 22-23 per cent less, after
factoring in higher import duties for components/steel, lower levels of automation, and transport
costs.
In August, 2003 Maruti crossed a milestone of exporting 300,000 vehicles since its first export in
1986. Europe is the largest destination of Maruti’s exports and coincidentally after the first
commercial shipment of 480 units to Hungary in 1987, the 300,00 mark was crossed by the shipment
of 571 units to the same country. The top ten destination of the cumulative exports have been
Netherlands, Italy, Germany, Chile, U.K., Hungary, Nepal, Greece, France and Poland in that order.
The Alto, which meets the Euro-3 norms, has been very popular in Europe where a landmark 200,000
vehicle were exported till March 2003. Even in the highly developed and competitive markets of
Netherlands, UK, Germany, France and Italy Maruti vehicles have made a mark. Though the main
market for the Maruti vehicles is Europe, where it is selling over 70% of its exported quantity, it is
exporting in over 70 countries.
Maruti has entered some unconventional markets like Angola, Benin, Djibouti, Ethiopia, Morocco,
Uganda, Chile, Costa Rica and El Salvador. The Middle-East region has also opened up and is
showing good potential for growth. Some markets in this region where Maruti is, are Saudi Arabia,
Kuwait, Bahrain, Qatar and UAE.
The markets outside of Europe that have large quantities, in the current year, are Algeria, Saudi
Arabia, Srilanka and Bangladesh. Maruti exported more than 51,000 vehicles in 2003-04 which was
59% higher than last year. In the financial year 2003-04 Maruti exports contributed to more than
10% of total Maruti sales.
V. MARUTI EMERGING AS R&D HUB FOR SUZUKI MOTOR CORPORATION
Japanese auto major Suzuki is all set to convert Maruti Udyog Ltd’s research and development (R&D)
facility as its Asia hub by 2007 for the design and development of new compact cars, according to a
top official of the firm. The country’s leading car manufacturer will make substantial investments to
upgrade its research and development centre at Gurgaon in Haryana for executing design and
development projects for Suzuki. This includes localisation, modernisation and greater use of
composite technologies in upcoming models.
The company will be hiring more software engineers and technocrats to handle Suzuki’s R&D
projects. Investment would be more in terms of manpower than in infrastructure, which is already in
place. Apart from working on innovative features, the R&D teams will focus on latest technologies
using CAD-CAM tools to roll out new models that will meet the needs of MUL’s diverse customers in
the future.
The reasons as to why it can be good for R&D is that
Ø Firstly the cost involved in R&D and infrastructure is low in India as compared to other countries.
Also the technical skills are abundantly available; again at a cheaper cost.
Ø Secondly, India is growing as an export hub along with the Indian market growing aggressively
into becoming an attractive one for investors.
Ø Thirdly, Suzuki’s investment in India, is also important as it has completely divested now as a
result MUL will now become a 100% subsidiary of Suzuki in the coming year.
KEY SUCCESS FACTORS
(1)The Quality Advantage
Maruti Suzuki owners experience fewer problems with their vehicles than any other car
manufacturer in India (J.D. Power IQS Study 2004). The Alto was chosen No.1 in the premium
compact car segment and the Esteem in the entry level mid – size car segment across 9 parameters.
(2)A Buying Experience Like No Other
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.
(3)Quality Service Across 1036 Cities
In the J.D. Power CSI Study 2004, 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.
(4)One Stop Shop
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.
(5) The Low Cost Maintenance Advantage
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.
(6)Lowest Cost of Ownership
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.
(7) Technological Advantage
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.
FUTURE CHALLENGES
Ø Maruti has always been identified as a traditional carmaker producing value-for-money cars and
right now the biggest hurdle Maruti is facing is to shed this image. Maruti wants to change it for a
more aggressive image. Maruti Baleno has failed due to one of the major reasons being that
customers could not identify Maruti with a car as sophisticated as Maruti Baleno. Maruti is looking
forward to bring about a perception change about the company and its cars. Maruti started the
exercise with the new-look Zen, and Suzuki’s decision to pick India as one of the first markets for this
radically different-looking car gave this endeavor a new thrust. Maruti has also changed its logo at
the front grill. It has replaced the traditional Maruti logo on grill ‘stylish ‘M’ with S’. The major thrust
in the facelift endeavour is with the launch of 1.3 litre Swift. It’s a style statement from Maruti to
Indian market.
Ø The next threat Maruti faces is the growing competition in compact cars. Companies like
Toyota, Ford, Honda and Fiat are planning to come out with small segment cars in near future.Ford is
launching Focus and Fiesta, GM is launching Aveo in 2006, Chevrolet is launching Spark in 2006,
Hyundai is launching its new compact car in 2006, Honda is launching Jazz in 2006, GM is has
reduced prices of its Corsa, Fiat is coming up with Panda and new Fiat Palio, Skoda is launching
Fabia. All this will pose a major threat to Maruti leadership in compact cars.
Ø New emission norms like Bharat Stage 3 which has come into effect from April 2005 has
increased car prices by Rs.20000 and Bharat Stage 4 which is coming into force in 2007 will
contribute in increasing car prices further. This could be of concern to Maruti which is low cost
provider of passenger cars.
Ø Rise in petrol prices and growing popularity of other substitute fuels like CNG will be
another threat to Maruti. There is also a threat to Suzuki from R&D investment by Toyota and Honda
in Hybrid cars. Hybrid cars could run on both petrol and gaseous fuels.
Ø There is a threat to Maruti models ageing. Maruti models like Maruti 800 which is in market for
the last twenty years and others like Zen and Esteem which have also entered the decline phase are
the other threats. Maruti is planning phasing out Zen in 2007 and there were rumors of phasing out
Maruti 800 also. This all makes Suzuki to replace these brands with new launches . As Swift and
Wagon R are replacing the Zen market. Maruti will have to keep on making modifications in its
present models or its models will face extinction.