A Course Project

on

Study of Marketing Mix Strategy for

MARUTI ESTEEM

2

EXECUTIVE SUMMARY The primary objective of the project was to understand the marketing practices used for

Maruti Esteem and its strengths/weaknesses vis-à-vis its competitors in Orissa market,

particularly Bhubaneswar and Cuttack region. For that, we needed to understand the

customers buying behavior and the 4P’s used by Maruti Udyog Limited (MUL). We were

also to evaluate the financial strength and market capabilities of MUL.

This project was conducted by our group in two successive stages. The objective of the

first stage was to collect consumer data and data from the dealer. The main aim of this

step was to draw out the customers brand perception of this particular segment i.e; A3

segment of cars. In this step we were also to find out the demographic and psychographic

analysis which helped customers in making their decision before buying a car. All these

factors were analyzed using various types of questions and basing on these answers we

segregated various attributes which directly or indirectly influence in buying of a car. The

second step in the process was the compilation of various data collected. According to the

data collected statistical analysis was done for each of the data. On the basis of this data

habits of people were deciphered.

Most of the A3 segment car owners were married people but their decision time was

nearly twice as that of the unmarried sector. Various cultural factors were seen to be

governing the buying patterns of various classes in the Bbsr-Ctc region. Majority of the

people surveyed made their decision after seeing an advertisement on TV, reading an

article in newspaper, etc. a very small percentage of the mass visited the company

websites or visited the dealers before deciding on the brand. Reference group here was

strongly dominated by the friends and relatives of the person concerned. As people tend

to choose products that communicate their life-style and it was also amply reflected in the

survey conducted, more than 60% of the customers were credit card owners.25% of the

customers had a club-membership and the rest of the chunk preferred to spend their free

time with their family and friends. The personal factors attributes of the customer were

also varying. Most of the A3 segment car owners were in 30-50 age group and 33% of

people belonged to the service class and 37% of people belonged to business class. Most

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of the A3 segment car owners were business persons or people having a salary bracket

above Rs.40000 per month.

The preferred brand of newspapers read were TOI followed by ET, hence dealers also

find newspapers as a very potential way of advertising to the local people. There are two

dealers in the cuttack-bhubaneswar region and both of them are strategically located in

the opposite corners of the city. Maruti –Esteem has an average sale of 5-6 per month

whereas Ford ikon has an average sale of 12-13. the dealer believes that esteem is a value

for money car. The dealer also offers various financing options to its customers. Dealers

also conduct road-shows in various posh localities to boost their sales. Their sales see a

peak during the festive seasons like dusshera and diwali while for the rest of the months

of the year the sales are average.

As regards to the A3 segment of cars, 30 % of people give weightage to price, i.e; price is

the most important factor in their mind before making the purchase. Other attributes

which are thought to be important by the customers are fuel-efficiency, style and features,

power/performance. Attributes to which the consumers don’t give a lot of weightage are

boot space, parking space,etc. The three most liked features in regards to Maruti Esteem

are its style, power and fuel efficiency. The attributes on which the company should

improve, according to the customer are ground clearance, rim size, etc. Customers were

always ready to suggest Esteem to another prospective buyer because of the various good

attributes/features of the car and also because of the Maruti brand tag that it carries.

Majority of the customers would prefer Esteem over Accent and Indigo but Ikon ranks

over Esteem in matter of preference in this region.

Overall, it was a very knowledge giving and enriching experience for us while working

on this project.

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TABLE OF CONTENTS ACKNOWLEDGEMENT .................................................Error! Bookmark not defined. EXECUTIVE SUMMARY ................................................................................................ 2 TABLE OF CONTENTS.................................................................................................... 4 1. Organization Overview................................................................................................... 6

1.1. Origin of Maruti Udyog Limited (MUL) 6 1.2. Growth of MUL 7 1.3. Business profile 8

2. Project objective............................................................................................................ 10

2.1 Back Ground to the Problem 11 3. Research Methodology ................................................................................................. 12

3.1 Type 12 3.2 Scaling Techniques 12 3.3 Questionnaire Design 13 3.4 Sampling Techniques 13 3.5 Data Collection 13 3.6. Data Analysis 14

4. Limitations of Survey ................................................................................................... 14 5. Results of Survey .......................................................................................................... 15

5.1. Demographic Characteristics of Target Customers 15 5.2. Psychographic Characteristics of Target Customers 16

5.2.1. Decision making Process ................................................................................ 16 5.2.2. Financing Options........................................................................................... 16 5.2.3. Brands under consideration............................................................................. 16 5.2.4. Attributes Valued Most................................................................................... 18

5.2.4.1. Most Valued Attributes of Maruti Esteem:.............................................. 18 5.2.4.2. Most Valued Attribute of Tata Indigo: .................................................... 18 5.2.4.3. Most Valued attribute of Ford Ikon: ........................................................ 19 5.2.4.4. Most Valued Attribute of Hyundai Accent:............................................. 19

6. Marketing Mix (4 P’s) Information .............................................................................. 19

6.1. PRODUCT 19 6.2. PRICING 28 6.3. PROMOTION: 28 6.4. PLACE: 28

7. Financial Analysis of MUL .......................................................................................... 30

7.1. LIQUIDITY RATIOS 30 7.2. LEVERAGE RATIOS 31 7.3. ASSET MANAGEMENT RATIOS/ TURNOVER RATIOS 31 7.4. PROFITABILITY RATIOS 32

5

7.5. VALUATION RATIOS 33 7.6. PER-SHARE RATIOS 33

8. Industry and Competitor Analysis ................................................................................ 34

8.1. Industry Analysis 34 8.1.1. Industry Scenario ............................................................................................ 34

8.2. Comparative Figures 36 8.2.1. Player wise Data ............................................................................................. 36 8.2.2. Comparison of Technical Specifications ........................................................ 36

8.3. Comparative Financial Analysis 37 8.3.1. LIQUIDITY RATIOS..................................................................................... 38 8.3.2. LEVERAGE RATIOS................................................................................... 38 8.3.3. ASSET MANAGEMENT RATIOS/ TURNOVER RATIOS........................ 39 8.3.4. PROFITABILITY RATIOS ........................................................................... 40 8.3.5. VALUATION RATIOS.................................................................................. 40 8.3.6. PER-SHARE RATIOS ................................................................................... 41

9. CONCLUSION............................................................................................................. 41 10. RECOMMENDATION .............................................................................................. 41 Appendix A1 (Questionnaire – I) ..................................................................................... 43 Appendix A2 (Questionnaire – II) .................................................................................... 46 Appendix A3 (Findings of Survey)................................................................................... 50 Appendix A4 (Product information of Maruti ESTEEM) ................................................ 58 Appendix A5 (Sources and Distribution of Revenue) ...................................................... 60 Appendix A6 (Financial Statement Analysis of MUL) .................................................... 61 Appendix A7 (Comparison with Competitors)................................................................. 65

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1. Organization Overview 1.1. Origin of Maruti Udyog Limited (MUL)

Maruti Udyog Limited (MUL) was established in Feb 1981 through an Act of Parliament.

When Maruti entered the Indian car market, it sought to fill what it perceived as two very

glaring needs. One to provide fuel efficient, low-cost vehicles, which were reliable and of

high quality. Two, to offer customers a friendly sales and after sales service. Total

automobile value and customer satisfaction: these objectives shaped our policies and our

approach to quality.

Additionally, the absence of an efficient public transportation system was leading to a

growing demand for passenger cars. A burgeoning work force and growing middle class

population meant that personal transport had become a necessity.

Suzuki Motor Company was chosen from seven prospective partners worldwide. This

was due not only to their undisputed leadership in small cars but also to their

commitment to actively bring to MUL contemporary technology and Japanese

management practices (which had catapulted Japan over USA to the status of the top auto

manufacturing country in the world).

A licence and a Joint Venture agreement was signed between Govt of India and Suzuki

Motor Company (now Suzuki Motor Corporation of Japan) in Oct 1982.

The objectives of MUL then were:

• Modernization of the Indian Automobile Industry.

• Production of fuel-efficient vehicles to conserve scarce resources.

• Production of large number of motor vehicles which was necessary for economic

growth.

The vision of the Organization is “The Leader in Automobile Industry, creating customers delight and shareholders wealth; A pride of India “.

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1.2. Growth of MUL

2003 Production of 4 millionth vehicle / Launched Grand Vitara

XL-7 / Listed on BSE and NSE after public issue oversubscribed by 10 times

2002 Rated no. 1 in JD Power Asia’s Customer Satisfaction study

2001 Rated no. 1 in JD Power Asia’s Customer Satisfaction Index study / Launched Versa / Lunched new businesses: TrueValue, Maruti Finance, Maruti Insurance and N2N

2000 Rated no. 1 in JD Power Asia’s Customer Satisfaction Index study / Launched Alto / 3 millionth vehicle since production start

1999 Plant 3 became operational / Launched Baleno and WagonR / Export Excellence Award / ISO 14001 certification

1998 CII-EXIM Business excellence award

1997 Produced the 2 millionth vehicle since commencement of production

1996 Awarded Star trading house status by Ministry of Commerce / Launched 24-hour emergency on-road vehicle service

1995 Plant 2 became operational / Installed capacity increased to 200000 units

1994 Launched Esteem / Produced 1 million vehicles since start of production

1993 Launched Zen, the 1st world car to hit Indian roads

1992 Suzuki increased its stake in Maruti to 50%

1991 Reached cumulative indigenization of 65% for all vehicles produced

1990 Launched Sedan Maruti 1000

1988 Reached an installed capacity of 100,000 units

1987 Exported first lot of 500 cars to Hungary

1986 Produced 100000 vehicles since commencement of production

1985 Launched Gypsy

1984 Installed capacity reached 40,000 units / Launched Omni

1983 Started Production / Launched Maruti 800

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1.3. Business profile

MUL is the leading automobile company in the passenger car segment with over 50% market share in FY04. It has a presence across many segments in automobiles. It is the leader in the mini and the compact segment with its brands like ‘800’, ‘Zen’, ‘Alto’, ‘Wagon R’. It also has a presence in the mid-size segment with its ‘Esteem’ and ‘Baleno’ brands and the ‘Omni’, ‘Vitara’, ‘Versa’ models. BOARD INFORMATION Mr. Shinzo Nakanishi CHAIRMAN Mr. Jagdish Khattar MANAGING DIRECTOR Mr. Junzo Sugimori JOINT MANAGING DIRECTOR Mr. Shinichi Takeuchi JOINT MANAGING DIRECTOR Mr. Kinji Saito DIRECTOR (MARKETING & SALES) Mr. O. Suzuki DIRECTOR Mr. R.C. Bhargava DIRECTOR Mr. S.V. Bhave DIRECTOR Mr. Amal Ganguli DIRECTOR Mr. Kumar Mangalam Birla DIRECTOR Mr.Manvinder Singh Banga DIRECTOR Ms. Pallavi Shroff DIRECTOR BOARD COMMITTEE Audit Committee Mr. Amal Ganguli CHAIRMAN Mr. Shinzo Nakanishi Ms. Pallavi Shroff SHAREHOLDERS’/ INVESTORS’ GRIEVANCE COMMITTEE Mr. Shinzo Nakanishi CHAIRMAN Mr. Jagdish Khattar Mr. Junzo Sugimori Mr. R.C. Bhargava

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Mr. Kumar Mangalam Birla COMPANY SECRETARY & CHIEF LEGAL OFFICER Mr. S. Ravi Aiyar AUDITORS Price Waterhouse CHARTERED ACCOUNTANTS REGISTERED OFFICE 11th Floor, Jeevan Prakash Building 25, Kasturba Gandhi Marg New Delhi – 110001 REGISTRAR & TRANSFER AGENT MCS Limited W-40, Okhla Industrial Area Phase – II New Delhi - 110020 Plant Location The company has three plants, all located in Gurgaon, Haryana at : Palam Gurgaon Road, Gurgaon – 122015, Haryana

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2. Project objective

The project has following objectives.

Part 1: To study the business and marketing practice of MUL

Part 2: To understand its competitors in business

Part 3: To understand the Customers Buying Decision Process

Part 4: To evaluate the financial strength and market capabilities of the firm

Part 5: To understand the 4 Ps used by the MUL in business

The project was divided into 3 distinct phases.

Phase 1:

To capture the Brand perception of customers of various brands in low end A3 segments

to which Maruti Esteem belongs and to find out the Demographic and Psychographic

characteristics of the above customers.

Key Deliverables:

1. Demographic characteristics of the target customer

2. Psychographic characteristics of the target customer

Phase 2:

To Study Maruti Esteem as a brand and to come up with the market perception

(customers).To collect their 4 P information in Orissa market (prices of brands, products,

range of products, no of dealers and distributors, advertising strategy followed in Orissa

market, their sales performance in Orissa market/ different kinds of consumer promotion

and dealer promotion schemes run by them in the past/ at present

Key Deliverables

1. 4 P’s Information

2. Industry and Competitor Analysis

3. Quotable quotes about Maruti Esteem taken from various magazines.

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Phase3: To study the financial capabilities of MUL by analyzing its financial statements

for past 3 years.

Key Deliverables

1. Liquidity Ratios

2. Profitability Ratios

3. Leverage Ratios

4. Asset Management/Turnover Ratios

Phase one of the problem was done by initiating a survey to find out the brand perception

of various brands of the car and also the demographic and psychographic characteristics

of the customer. The research was designed to find out the apparent factors and also to

find out the underlying dimension which persuades the customer to purchase a particular

brand of car. A sample size of 52 potential customers was chosen. The survey contact

points were the dealers around Bhubaneswar. Customers surveyed were located in the

posh localities of Bhubaneswar and also we surveyed people in the market places. Phase

2 of the problem was executed by contacting the two dealers to get information about the

various brands and also by collecting data from secondary data sources. Phase2 of the

problem was conducted by analyzing the financial statements of 3 consecutive years

(2001-02 to 2003-04). Various ratios were calculated for MUL and its competitors.

2.1 Back Ground to the Problem

The study was conducted to find out the brand perception of customers with regards to

various brands in the market. The survey also focused on the various factors that the

customers look in for before buying a car so that the company can leverage upon these

points to attract more and more customers. The various brands under the analysis

spectrum are:

Ø Maruti Esteem

Ø Ford Ikon

Ø Tata Indigo

Ø Hyundai Accent

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3. Research Methodology

The General study was converged as a specific study for Maruti Esteem. The study was

initiated to find out the consumer profile, brand perception and cross preference among

Maruti Esteem and Competitor brands.

Our approach to the research design tasks went through the following tasks.

Information needed

?

Measurement and scaling Procedures

?

Appropriate Data collection

?

Sampling Process and sample size

?

Data Analysis plan

These issues are addressed as the following

3.1 Type

The data collection was done through

Ø Secondary Data Analysis

Ø Survey

Secondary data is obtained by contacting the Maruti dealers.

3.2 Scaling Techniques

We asked the customers to rank the various attributes on a scale of very important,

important and not very important. To find-out the brand perception of various brands,

paired comparison between them is used.

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3.3 Questionnaire Design

Questionnaire design was the critical issue as the questionnaire reflects the survey

purpose .The questionnaire was meticulously prepared by identifying the various

variables. The same scale of yes/no and very important, important and not so important

was used through out so as to make the respondent comfortable.

Firstly a questionnaire was prepared and few people were surveyed. After this survey we

realized the flaws in the questionnaire and then a modified questionnaire was prepared

and people were surveyed on this modified questionnaire.

Please refer to Appendix A1 and Appendix A2.

3.4 Sampling Techniques

In the survey conducted, the sample was random in nature comprising of people from

different age groups and income stratas.

3.5 Data Collection

Data collection is the important step after the sample is selected on which the survey is

being conducted. With data that is available in the hard form we converted that to

electronic form, to analyze the data using the MS Excel softwares.

In the data collection customers were approached during the working hours at dealers

point. The first part of the survey was a disguised survey were their was no mention of

Maruti as Organization. It was conducted as a part of institute project. Purpose of the

survey was explained and was asked whether they are interested to take part in the survey

.Later Questionnaire was handed over to them, and necessary instructions were given to

complete the questionnaire .The questionnaires were returned back after filing up on their

convince, While receiving the filled in questionnaire care was taken to check whether

there are any unfilled items in the questionnaire.

We have also collected data from various sources listed below:

§ www.marutiudyog.com

§ www.indiacar.net

§ www.siamindia.com

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§ www.indiainfoline.com

§ www.auto.indiamart.com

§ www.equitymaster.com

§ CMIE Prowess Database

§ ISI emerging markets Database

3.6. Data Analysis

The data of score of features and score of brand perception was fed into the excel sheet .

Separate Excel sheets were employed for analysis of each brand and also to keep it

concise and unambiguous.

4. Limitations of Survey Response Errors - These may arise when the respondents give inaccurate or incomplete

answers. For e.g. in our survey a respondent may not mention that he had test driven a car

before purchasing it.. A major problem faced in the survey involved the comparative

ratings of various attributes for all the brands of cars. Many of the respondents were not

very willing to rank so many factors as they perceived it to be time consuming.

Open Ended Questions – All the questions in the questionnaire were open-ended to

avoid any kind of bias from the respondents end. But a drawback of this approach is that

there was an incomplete capture of his responses as the respondent could not always

come out with the purchase steps and the time taken in them. The reasons for such

inaccuracy could be because of unfamiliarity, fatigue, boredom, faulty recall and the

question format.

Random Sampling Errors – This can occur as the particular sample selected is an

imperfect representation of the population of interest. The area covered in the survey was

Cuttack and Bhubaneswar region and the customer preferences and tastes in different

regions could not be covered.

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5. Results of Survey 5.1. Demographic Characteristics of Target Customers

Average Age Male(%) Female(%) Married(%)

Average Monthly Income

Esteem 36 90 10 76 30-40k Indigo 34 95 5 75 30-40k Ikon 38 90 10 87 40-50k Accent 37 95 5 86 40-50k

No of Earning Members 1(%) 2(%) >2(%) Esteem 8 60 32 Indigo 10 55 35 Ikon 5 50 45 Accent 7 58 35

Media habits: Brands Newspaper/Magazines TV Channel Esteem TOI, Hindu, Outlook HBO, MTV, Star, ZEE Indigo Ind Exp, Business Today Star, Sony, NDTV Ikon TOI, ET, Business World Discovery, HBO, Aajtak Accent TOI, ET, India Today HBO, AXN, Star, Sony Occupation Profile: Business(%) Service(%) Professional(%) Others(%) Esteem 37 33 17 13 Indigo 27 41 15 17 Ikon 22 36 30 12 Accent 41 29 25 5

Please refer to Appendix A3.

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5.2. Psychographic Characteristics of Target Customers

5.2.1. Decision making Process Decision No. of the persons Find out financing options 15 Check the rate of interest/EMI and tenure

11

Check up down-payments Involved

8

Check out the turn-around time Involved

4

Discounts being offered 7 Cash purchase 2

Above are the various options present before the customer after deciding on the brand of the car. Most of the people prefer to go in for checking the rate of interest/EMI and tenure of repayment loan. The distribution is shown below for the various financing options possible: 5.2.2. Financing Options 5.2.3. Brands under consideration People who were willing to buy a car were asked a question regarding the brands under their consideration. Most of the buyers were willing to buy a Zen and their second choice was Esteem.

Financing options

15, 32%

11, 23%8, 17%

4, 9%

7, 15% 2, 4%

Find out f inancing options

Check the rate of interest/EMIand tenure of loan

Check-up dow n paymentsinvolved

Check up the turn around timeinvolved

Evaluate discounts beingoffered by the dealers

Cash purchase

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Brands under consideration

No. of willing Buyers

Zen 7 Esteem 6 Ikon 5 Swift 5 Accent 3 Indica 2 Ford 1 Alto 1 Indigo 1 Santro 1

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5.2.4. Attributes Valued Most The various attributes of the four-wheeler on which the customers were surveyed are listed below. The most highly ranked or wanted attribute are spaciousness, style and fuel efficiency. The attribute which thought ‘not important’ by the customers was the parking space of the car. Attributes Ratings Parking space 51 Status Symbol 75 Resale value 78 After Sales Service 81 Power/Performance 90 Boot Space 93 Maintenance Cost 96 Feature 96 Brand Image 99 Price 108 Fuel efficiency 114 Style 117 Spaciousness 120

5.2.4.1. Most Valued Attributes of Maruti Esteem: The most valued attribute in Maruti Esteem was Value for money followed by style, boot space and brand image. Brands/attributes Style Boot

Space Features Parking

Space Brand Image

Value for money

Maruti Esteem 23 13 10 10 13 30

5.2.4.2. Most Valued Attribute of Tata Indigo: In Tata Indigo the most valued attribute was style followed by boot space, features, parking space and value for money. Brands/attributes Style Boot

Space Features Parking

Space Brand Image

Value for money

Tata Indigo 24 16 16 16 12 16

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5.2.4.3. Most Valued attribute of Ford Ikon: Very similar to the lines of Maruti Esteem, Ford Ikon also has style as its most valued attribute follwed by value for money and brand image. Brands/attributes Style Boot

Space Features Parking

Space Brand Image

Value for money

Ford Ikon 25 9 16 13 19 19

5.2.4.4. Most Valued Attribute of Hyundai Accent: In congruence with Maruti Esteem and Ford Ikon, Hyundai Accent consumers also value style as their most important attribute followed by boot space and value for money. Brands/attributes Style Boot

Space Features Parking

Space Brand Image

Value for money

Hyundai Accent 29 18 11 11 14 18

The consumer psyche and their perception about various brands gives importance to following features in the below given brands. Ikon Style Value for money Brand image Indigo Style Boot space Features Esteem Value for money Style Brand Image Accent Style Value for money Boot Space

Please refer to Appendix A3.

6. Marketing Mix (4 P’s) Information 6.1. PRODUCT

ESTEEM – PRODUCT HISTORY Esteem was the first luxury car to hit the Indian roads – launched in 1994. It was an

aspiration, a dream for all those used to travelling in 800s, Fiats and Ambassadors. It was

targeted at senior executives, businessmen, entrepreneurs in 40 plus age category with a

monthly household income Rs. 40,000 and above.

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Customer profile was the status conscious segment - upwardly mobile, enjoy active

social lives, are achievement oriented and prefer up-market brands.

Esteem was positioned as the car for self-made people & achievers in their field. The

positioning statement was “What Men With Drive Will Drive”. It created a record by

bookings of over 2,80,000 cars - highest ever record in the Indian Car market.

Over the years, with the entry of lots of A3 players competition has heightened - Cielo in

1994, Opel Astra & Ford Escort in 1996, Honda City and Lancer in ‘97-’98, Accent and

Ikon in ’99, Corsa in ’00, Indigo and Optra Chevrolet in ’03, Indigo Marina in ’04.

A3 segment is the fastest growing segment in the Auto Industry – growing currently at a

level of 28.3% over 2003-04. Maruti has a market share of 4.5% Esteem and 1.6%

Baleno. Hence, for Maruti to increase market share in the segment Esteem’s market share

increase is vital.

With introduction of Esteem Minor, Esteem has beaten its last 9 years sales. It has

already more than doubled its market share, growing at 88% after the launch of Esteem

Minor. To add to it, Esteem has won five accolades last year. Esteem has aimed to

sustain all the new competition, positioning itself as an entry level mid-size car with a

value for money proposition (slight premium over Indigo), superb fuel efficiency, best

power-to-weight ratio, low cost of maintenance and high resale value.

Esteem target audience now consists of males, 25 – 35 years, upgraders from a premium

small car or an A-segment or B-segment car. The task ahead lies in keeping the brand

refreshed and move ahead much faster than competition.

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Milestones Year Milestones

1994 Esteem launched in November

1995 Vx and Lx versions introduced.

1996 Ax auto version and power steering

introduced.

1997 ’98 Esteem with new shape, interiors,

features launched.

1998 Esteem rules rally circuit

2000 MPFi Esteem Introduced

2001 First limited edition introduced

2002 Esteem diesel launched, Lxi , Vxi versions

introduced.

2003 Second Limited edition velocity launched;

rated

2004 Esteem Minor launched on July 5

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PRODUCT LIFE CYCLE CURVE The product life cycle curve for Esteem is given below

The curve had been following a typical growth-slump-maturity pattern with very fast

growth in the year of the launch, followed by immediate slump and then maintenance of

current levels in the maturity stage.

The introduction of the Esteem Limited in 2001, LXi variant & Diesel series in 2002,

limited edition Velocity in 2003 have led to the beginning of a recycle pattern.

With introduction of Esteem Minor, there is a huge scalp in the curve and a new cycle

has begun.

yearly sales

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Product launch

Launch Vx

Launch Lx

Introduction Ax

Upgrade Lx Vx Ax

Esteem Deluxe

Upgrade Lx Ax

Esteem Velocity

Launch Lxi,Vxi,D,Di

Esteem Minor

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THE A3 PLATFORM There are a large number of players in A3, and this segment has seen the largest number

of product modifications.

This has resulted in fluctuations and fragmentation of market share as shown below.

However, the top3 players have been the same with the exception of Indigo getting added

to the list in January’03:

Esteem Accent Ikon Indigo

00-'01 11840 12% 16088 117% 18023 19% 0 0%

gr '01-'02 0% 10% -19%

01-'02 11801 14% 17700 21% 14655 18% 0 0%

gr '02-'03 -12% 8% 2%

02-'03 10425 11% 19152 21% 14954 16% 6767 7%

gr '03-'04 11.46% 47% 40% 311%

03-'04 11620 8% 28231 47% 20881 15% 28003 20%

gr'04-'05 88% -19% 13% 40%

04-'05 21849 12% 22917 13% 23644 13% 39319 22%

(The figures marked in grey show market shares)

The game continues to be between Indigo, Accent, City , Ikon and Esteem. The hero of

2004 was definitely Honda City and Maruti Esteem. Accent after 3 years of rules

happened to have taken a bit slower growth rate.

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A perceptual map on Esteem v/s the other A3 players for ‘04-’05 is given below

comparing market shares on X-Axis with growth over last year on the Y-Axis:

Product Variety: Model : Esteem D

Owners Feedback-

What a terrific experience!!! Thank god and Maruti for letting me have such a fun machine. On Road Prices- The model is discontinued. Tech. Specs.

Displacement(cc) 1517 cc No. of cylinders, Valves 16 Valve, inline 4,2/Cylinders Transmission Manual, 5 Forward, 1 reverse, all -synchromesh Max power(PS/rpm) 57/5000 Max Torque(kgf-m/rpm) 96/2500

Std. Equipment- Supercool AC, power steering, tubeless tyres.

Model : Esteem Di

Esteem

Accent

Ikon

Indigo

Low market Share High Growth

Low market Share Low Growth

High market Share Low Growth

High market Share High Growth

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Owners Feedback- I have only 1 word for it OUTSTANDING it has not given me any trouble except that the electric windows have become a bit slower but that''s okay. On Road Prices- The model is discontinued. Tech. Specs.

Displacement(cc) 1298 cc No. of cylinders, Valves 16 Valve, inline 4,4/Cylinders Transmission Manual, 5 Forward, 1 reverse, all –

synchromesh Max power(PS/rpm) 85/6000 Max Torque(kgf-m/rpm) 106/3000

Std. Equipment- Supercool AC, power steering, tubeless tyres.

Model : Esteem Lx BS-II

Owners Feedback- What a terrific experience!!! Thank god and Maruti for letting me have such a fun machine. On Road Prices- The model is discontinued. Tech. Specs.

Displacement(cc) 1298 cc No. of cylinders, Valves 16 Valve, inline 4,4/Cylinders Transmission Manual, 5 Forward, 1 reverse, all –

synchromesh Max power(PS/rpm) 85/6000 Max Torque(kgf-m/rpm) 106/3000

Std. Equipment- Supercool AC, power steering, tubeless tyres.

Model : Esteem Lx BS-III

Owners Feedback- best choice for Indian market, the best value for money, low maintenance cost, extremely fuel efficient even on high speeds. On Road Prices- Rs4,43,426* Tech. Specs.

Displacement(cc) 1298 cc No. of cylinders, Valves 4 Cylinder inline Transmission 5-speed manual,all synchro-mesh Max power(PS/rpm) 85/6000 Max Torque(kgf-m/rpm) 110/4500

Std. Equipment- Supercool AC, front grill(chrome plated), tubeless tyres

Model : Esteem Lxi BS-III

Owners Feedback-it feels great when the the needle of the speedo meter roams around 170kmph leaving behind other cars huffing behind On Road Prices- Rs 4,73,681* Tech. Specs.

Displacement(cc) 1298 cc No. of cylinders, Valves 4 Cylinder inline Transmission 5-speed manual,all synchro-mesh Max power(PS/rpm) 85/6000 Max Torque(kgf-m/rpm) 110/4500

Std. Equipment- super cool AC, power steering, front power window, tubeless tyres. Central locking.

Model : Esteem Vxi BS-III

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Owners Feedback- What a terrific experience!!! Thank god and Maruti for letting me have such a fun machine On Road Prices- Rs 5,09,019* Tech. Specs.

Displacement(cc) 1298 cc No. of cylinders, Valves 4 Cylinder inline Transmission 5-speed manual,all synchro-mesh Max power(PS/rpm) 85/6000 Max Torque(kgf-m/rpm) 110/4500

Std. Equipment- Supercool AC, front grill(chrome plated), tubeless tyres, Rear seat centre arm rest, stereo, driver seat height adjust, central locking, rear defogger.

*Prices are as per the prices of Jyote Motors Ltd., Design:

Styling

• Sparkling clear lens headlamps • Elegant chrome front grille • Front fog lamps • Stylish new rear with clear lens combination lamps and new trunk lid garnish

Comfort

• Supercool AC for a comfortable drive • Precise power steering for total control • McPherson strut suspension for a smoother ride Tubeless tyres for superior

road grip • New white lit dials for easy viewing • Low fatigue seats

Performance

• An MPFI, 16 valve, 16-bit, 1300 cc All Aluminium Engine (ACE) • Acceleration of 0-100 kmph in 11.49 secs* • Highest power-to-weight ratio of 99 bhp per ton

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• 85 bhp @ 6000 rpm (Petrol) • Higher torque of 106 Nm @ 3000 rpm for quick pickup (Petrol)

Safety

• 8 inch vacuum booster assisted brakes ensure precise, stable and safe stopping • Collapsible steering column protects the driver in case of frontal collision • Rugged monocoque chassis and crumple zones distribute collision impact • Side impact beams on all four doors provide safety during side impacts

Brand name: Maruti Suzuki has a sales network of 307 state-of-the-arts showrooms across 189 cities, with a workforce of over 6000 trained sales personnel to guide their customers in finding the right car. Their high sales and customer care standards led them to achieve the No.1 nameplate in the J.D. Power SSI study 2004. 1)The SSI study measures sales satisfaction across 6 parameters: deal received, paperwork, dealer facility, salesperson, delivery timing and delivery process. 2)Maruti Suzuki has not only got the No.1 nameplate in the J.D. Power SSI study 2004, but also ranked way above the industry average (Maruti Suzuki was at 784 while industry average was at 760). What is significant is that it was rankedabove Skoda, Ford, Chevrolet, Mitsubishi and Hyundai. Services: After sales services: maruti has a policy that within three days of the delivery of a car to a customer, the customer receives a call from the dealer enquiring him about the experience and any problem that he may be facing. In case the customer reports any such issues or has any grievances immediate counter measures are taken by the dealer. There is a separate customer care cell for both sales and services. Maruti also follows a feedback mechanism in which the dealers send a satisfaction index card to the customer from time to time. By assessing the responses of the customers in this cards the level of satisfaction of customer can be measured. Apart from this maruti also sends such cards to the customers so that it gets direct feedback from the customers. Please refer to Appendix A4.

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6.2. PRICING Three main models of esteem are available in Bhubaneswar and Cuttack region. Maruti Esteem: LX(Rs) LXi(Rs) VXi(Rs) 4,43,426 4,73,681 5,09,019 FINANCING OPTIONS: maruti finance has channel partners such as ICICI, HDFC, Indus Ind bank merged with Ashok Leyland. The minimum income level of customers of maruti esteem is in the slab of Rs.30000-40000. the customer is financed 80-85% of the cost of the car, depending on the profile of the customer. This loan is given for a maximum period of 5 years. The average rate of interest on the loan amount in 9% and it is calculated using reducing balance method(RBM). DEALERS PROSPECTIVE: according to the dealer the segment in which Esteem is placed is a very competitive segment with fierce price wars. Many major players such as Ford(Ikon), Hyundai(Accent), Tata(Indigo) have entered this segment with competitive prices. The dealer believes that Esteem is good value for money. 6.3. PROMOTION: In the Bhubaneswar ,Cuttack region maruti advertises in local newspapers such as Dharitri, Samaj along with the ads that are placed in leading daily newspapers such as Times Of India, Hindustan Times and Indian Express. As part of the initiatives taken by the dealers road shows are organized in posh areas, parks and VIP gathering places where the cars are put on display and test drives are offered. The dealers do not advertise on local TV channels as it is handled by Maruti on the national level. Advertisements of Maruti regularly appear on national family and news channel. The dealer has launched a unique program named AUTOZONE PLUS "THE VANTAGE CARD". A PVC card and Free service Coupon Booklet is given to every customer who has bought a Car from us and has got Three Consecutive Services done from us. The customer is also awarded Vantage Points every time we service his car which are redeemable for various spare parts or services at their workshop. 6.4. PLACE: There are two dealers of Maruti in Bhubaneswar, Cuttack region. One dealer is in Rasoolgarh on Puri-Bhubaneswar road and the other one is in Kalpana Square. These two dealers are strategically placed at the two opposite corners of the city and according to the dealer it is the best possible location. The reason the dealer gives is that these places have little traffic congestion hence test drives are easier and also there is ample space for parking the vehicle.

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Dealers and Service Stations / City Angul Berhampur Bhubanewsar Cuttack Rourkela Sambhalpur Dealer Showrooms 1 1 2 1 1 1 Dealer Workshops 1 1 1 1 1 1 True Value Outlets 0 0 0 0 1 1 Maruti Authorised Service Stations 2 0 0 2 1 0

Address of Dealers in Bhubaneswar Jyote Motors Pvt Ltd 462 Gautam Nagar Cuttack Puri Road Bhubaneswar 572872 Ph. No. : 0674-2436829 Email : sales@jyotemotors.com Narayani Motors Pvt. Ltd 56 and 57, Rasulgarh, Bhubaneswar Email : budhraja@sancharnet.in

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7. Financial Analysis of MUL The objective of this section is to analyse the financial performance of MUL over 2001-02, 2002-03 and 2003-04. It starts with a brief overview of the final accounts of 2003-04 and moves on to analyse the growth and financial ratios of MUL over these three years. Some important Annual financial figures The total income of MUL for the year 2003-04 was Rs. 116894 million as against Rs 92580 million in 2002-03, showing an impressive growth of 26.3%. Profit before Tax (PBT) recorded an impressive growth of 26.3%. Profit before tax (PBT) recorded a massive jump of 173% to Rs. 7698 million in 2003-04 from Rs. 2821 million in 2002-03. Profit after Tax (PAT) increased by 270.3% to Rs. 5421 million in 2003-04 from Rs. 1464 million in 2002-03. Please refer to Appendix A5. MUL grows strongly in 2003-04

1) Income Growth Total Income in 2001-02 was Rs. 95646 million. It decreased to Rs. 92580 million in 2002-03. However, in 2003-04, it increased very highly to Rs 116894 million.

2) Sales Growth

Sales of MUL in 2001-02 were Rs. 92512 million. It came down to Rs. 90656 million in 2002-03, but increased sharply to Rs 114216 million in 2003-04.

3) Profit Growth

All the profit measures show that MUL’s profits jumped sharply in 2003-04 over 2002-03. This bodes very well for the company not only in terms of performance, but also in terms of stakeholders’ satisfaction.

7.1. LIQUIDITY RATIOS Herein we analyse the ability of Maruti Udyog Limited to meet its short-term obligations. The important ratios involved in analyzing liquidity position are: 1) Current Ratio The current ratio measures the ability of the company to meet its current liabilities. Maruti Udyog Limited’s current ratio was 1.166 in 2001-02. It remained the same at 1.670 in 2002-03. However, we find that in 2003-04, the current ratio zoomed to 2.282. Though apparently, it can be concluded that MUL’s short-term solvency has greatly improved from 2002-03 to 2003-04, better certainty can be obtained only after analyzing the following ratios. 2) Quick Ratio The quick ratio is a more stringent measure of liquidity because it takes into account more liquid ratios excluding inventories. The quick ratio of MUL was 0.47 in 2001-02. It increased highly to 0.97 in 2002-03 and again zoomed to 1.57 in 2003-04.

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This high increase in quick ratio clearly shows that even after excluding inventories, the liquidity position has increased to a great extent 3) Cash Ratio This ratio is the most stringent measure of liquidity because it takes into account the most liquid assets like cash, bank balances and short-term marketable securities. This ratio was 0.05 in 2001-02. It increased tremendously to 0.60 in 2003-04, and again leaped to 1.18. This shows that MUL’s liquidity has improved sharply in 2003-04. 7.2. LEVERAGE RATIOS Leverage ratios help in assessing the risk arising from the use of debt capital. Debt-equity Ratio This ratio shows the debt raised by the company per rupee invested by the owners of the company. The ratio was 0.289 in 2001-02. it decreased to 0.213in 2002-03 and again to 0.119 in 2003-04. this implies that the degree of protection to the creditors of MUL has been continuously increasing. 2) Interest – coverage ratio Also called the times interest earned, this ratio is used widely by lenders to assess a company’s debt capacity. MUL’s interest coverage ratio was 2.79 in 2001-02. it more than doubled to 6.11 in 2002-03 and more than tripled to 18.67 in 2003-04. this shows that even if profit before interest and taxes suffer a considerable decline, MUL can easily meet its interest burden. 7.3. ASSET MANAGEMENT RATIOS/ TURNOVER RATIOS These ratios reflect the ability of the company to effectively utilize the assets. Inventory Turnover

This ratio is an indicator of how fast the inventory is moving through the firm and generating sales.

a) Raw Materials Turnover: This ratio was 10.87 in 2001-02. It increased to 16.21 in 2002-03, and then to 26.81 in 2003-04. This has taken place because consistently declining inventory levels from 600 in 2001-02 to 387.55 in 2002-03 and then to 315.8 in 2003-04.

b) Finished Goods turnover: This ratio was 49.24 in 2001-02. It declined

in 2002-03 due to higher average inventory level to 40.35 in 2002-03. But it again leaped to 68.12 in 2003-04. This has taken place due to consistently declining inventory levels from 196.5 in 2002-03 to 147 in 2003-04. Since the increase in inventory turnover has been due to declining inventory levels, we cannot say with certainty that inventory management has become more efficient.

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Debtors’ Turnover This ratio shows how many times sundry debtors turn over during the year. It was 12.21 in 2001-02. It decreased slightly to 12 in 2002-03, but then increased highly to 16.77 in 2003-04. so, it can be concluded that credit management became much more efficient in 2003-04. Debtors’ days This ratio represents the no of days’ worth of credit sales that is locked in sundry debtors. It was 29 in 2001-02, 30 in 2002-03 and decreased to 21 in 2003-04. since the credit policy of MUL is not known, we cannot comment whether the debtors’ days of MUL reflect prompt collection or not, but it can be concluded that collection has improved a lot from 2002-03 to 2003-04. Fixed Assets Turnover This ratio measures sales per rupee of investment in fixed assets. This ratio was 2.82 in 2001-02. It increased to 3.05 in 2002-03 and then very highly to 4.54 in 2003-04. In 2002-03 the ratio increased due to reduction in net fixed assets only. So, we cannot say that fixed assets were employed more efficiently. In 2003-04, it was due to both increase in net sales and reduction in net fixed assets. So, there has been slightly higher efficiency in utilization of assets. 7.4. PROFITABILITY RATIOS Profitability reflects the final results of business operations. The profit margin ratios measure the profits of the company at different stages of operations. The Rate of Return ratios reflect the relationship between profit and investment. 2003-04 witnessed a substantial increase in prices of steel — a major raw material in automobile production. Being in an intensely competitive market, MUL could not pass on this input price hike to customers, and had to rely on improving purchase management and productivity to maintain profitability. The company has been successful in this endeavor. Even under such a difficult environment, costs of raw material and components as a ratio to net sales actually decreased by 4.9 percentage points — a testament to our operational efficiencies. This has resulted in improvements in all key profitability ratios. Gross Profit Margin This ratio shows the margin left after meeting manufacturing costs. It was 3.1 in 2001-02. it increased to 5.3 in 2002-03, and then substantially to 10 in 2003-04.

Profits / losses (in Rs. million) 2001-02 2002-03 2003-04

PBDIT 5272 6443 13334

Financial charges (incl. lease rent) 660 527 449

PBDT 4612 5916 12885

Depreciation 3429 3221 4949

PBT 1183 2695 7936

Tax provision 138 1231 2515

PAT 1045 1464 5421

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We see from the above table that all the profit ratios have been consistently increasing over the 2 years. So, we can conclude that MUL has been efficient not only in production but also in administration, selling, pricing (from increasing PBDIT), financing (increasing PBT), and tax management (increasing PAT). Especially, we find that there has been a quantum jump in the profitability of 2003-04 as compared to 2002-03. Return on Capital Employed MUL’s ROCE increased from 5.9% in 2001-02 to 6% in 2002-03. In 2003-04, the ratio jumped substantially to 15.2% in 2003-04. It clearly shows that the earning power of MUL post-tax has increased very highly. Return on Net-Worth MUL’s Return on Net worth increased from 4.1 in 2001-02 to 4.9 in 2002-03. Then it increased very highly to 15.2 in 2003-04. From this trend, we can conclude that the productivity of equity funds invested in MUL has increased very highly in 2003-04. 7.5. VALUATION RATIOS Valuation ratios indicate how the equity stock of the company is assessed in the capital market. Since the market value of equity reflects the combined influence of risk and return, valuation ratios are the most comprehensive measures of a firm’s performance. Price-Earnings Ratio Perhaps the most popular financial statistic in stock market duiscussion, this ratio reflects the growth prospects, risk characteristics, shareholder orientation, corporate image and degree of liquidity of the company. Maruti Udyog Limited was listed on the stock exchanges in 2003. Its average P/E ratio in 2003-04 was 18.4 compared to industry P/E ratio of 12.4. Price-Book Value ratio This ratio shows the contribution of the company to the wealth of the society. It shows the amount of wealth created for every rupee invested in it. MUL’s P/BV ratio in 2003-04 was 3.1 which was same as the industry figure of 3.1 7.6. PER-SHARE RATIOS EPS MUL’s EPS was 79 as on 31st Mar, 2002. It decreased very highly to 5.1 on 31st Mar, 2003, but increased to 18.8 on 31st Mar, 2004 on the back of much higher profits. Book Value Per Share MUL’s Book value per share was 1956.2 as on 31st Mar, 2002. It decreased to 104.2 on 31st Mar, 2003, but again increased to on 31st Mar, 2004. Please refer to Appendix A6.

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8. Industry and Competitor Analysis 8.1. Industry Analysis 8.1.1. Industry Scenario The passenger vehicles industry comprises passenger cars, utility vehicles (UV) and multi-purpose vehicles (MPV’s). The fortunes of the auto sector are strongly correlated to macro-economic parameters and the performance of the industrial sector. In India, around 80% of all new cars are financed. The increased availability of finance at low rates and strong GDP growth translated in a healthy growth for the industry.

Domestic Sales Exports Industry Volumes FY04 FY03 Growth (%) FY04 FY03 Growth (%)

Passenger Vehicles Passenger Cars 696207 541491 28.57 125327 70263 78.37 UVs including MPVs 204545 165707 23.44 3989 1742 128.99 Total Passenger Vehicles 900752 707198 27.37 129316 72005 79.59

Passenger car sales account for over 77% of total passenger vehicle market and UV’s account for the balance. Segmentation of MUL’s Passenger Cars

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Industry and MUL Passenger Car volumes

0 100000 200000 300000 400000 500000 600000 700000 800000 900000

No. of cars

98-9999-0000-0101-0202-0303-04

Year

Passenger cars in India

Passenger Car Market Maruti

Year

Passenger Car Market Maruti

98-99 615318 376643 99-00 567728 329438 00-01 570863 335468 01-02 593578 326941 02-03 755771 417436 03-04 891810 536301

CORRELATION OF PASSENGER CAR MARKET AND MARUTI SALES AS OBSERVED OVER 1998-99 TO 2003-04 IS 0.977765 In FY04, vehicle sales contributed for 94.6% of the gross sales and the balance 5.4% was contributed by sales of spare parts, dies and moulds and components. The company registered sales volumes of 472,122 units including exports in FY04. Net sales increased by 31.3% to Rs93.7bn in FY04 from Rs71.4bn in FY03.

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8.2. Comparative Figures 8.2.1. Player wise Data

Installed Capacity (Nos. per annum)

Turnover (Rs. In

million)

Investment (Rs. In million)

Maruti Udyog Ltd. 350000 90636 45231 Tata Motors 360000 108551 11960

Ford India Pvt. Ltd. 100000 10514 10248 Hyundai Motor

India Ltd. 120000 40602 32200 8.2.2. Comparison of Technical Specifications

Feature Comparisons - Esteem vs Direct Competitors

Feature Esteem VXi

Tata Indigo GLX

Opel Corsa 1.6

GLS

Ford Ikon 1.6

EXi

Hyundai Accent GLE

Honda City EXi

The Esteem Advantage

Power-to-weight Ratio

(BHP/Tonne) 97.7 79 88 92 94 74

Best power-to-weight

ratio ensures superior driving

experience, faster pick-up

Average Mileage specified in

kms** 12.6 NA 11.1 11.4 10.9 11.9 Easy on your

purse

Fuel efficiency (highway) (kpl) 16.7 14.1 13.5 13.4 13.8 16.6 Easy on your

purse

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Total cost of ownership

(Rs/km) *** 3.54 NA 4.07 4 4.02 4.03 Best value

for money

Source: Published literature & brochures. *Autocar India, August 2004

**Autocar India, December 2003 ***Autocar India, January 2004

8.3. Comparative Financial Analysis The objective of this section is to compare the financial performance of Maruti Udyog Limited with its competitor, Tata Motors Limited. Comparison of important annual financial figures Total income of Tata Motors in 2003-04 was Rs. 154516.6 million as opposed to MUL’s Rs. 116894 million. Profit before tax (PBT) of Tata Motors was Rs. 13391.2 million as opposed to MUL’s PBT of Rs. 7698 million in 2003-04. Profit after tax (PAT) of Tata Motors was Rs. 8565.7 million in 2003-04 as opposed to MUL’s Rs. 5421 million. All the figures clearly show that the performance of Tata Motors in terms of absolute numbers surpasses that of Maruti Udyog Limited. The following ratio analysis will show whether Tata Motors scores over MUL only in terms of absolute numbers or also in terms of profitability. Growth of Maruti Vs Tata Motors

1) Income Growth

Total income of Tata Motors grew by 8.2% in 2001-02. in 2002-03, the growth rate increased to 23%, and again in 2003-04 to 40%. Total income of MUL grew by 3.4% in 2001-02. in 2002-03, it decreased by 4.2% in 2002-03, but increased substantially by 26.3%. So, we can conclude that Tata Motors has consistently recorded a better income growth than Maruti Udyog Limited.

2) Sales Growth

The average sales growth of automotive industry in 2003-04 was 17.1% that increased to 26.5% in 2003-04. Net sales of MUL increased by 5.47% in 2001-02. The growth rate decreased to just 0.4% in 2002-03, but shot up tremendously to 30.38% in 2003-04. Tata Motors, on the other hand, grew by 9.79% in 2001-02. It grew by 22.27% in 2002-03, and this rate doubled to 45.7% in 2003-04. So, even this figure shows that Tata Motors has shown consistently higher sales growth rate than Maruti Udyog Limited.

3) Profits Growth

Maruti Udyog Limited Tata Motors Profits / losses (in %) 2001-02 2002-03 2003-04

Profits / losses (in %) 2001-02 2002-03 2003-04

PBDIT 322.44 22.21 106.9 PBDIT 113.43 63.86 59.33

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PBDT 768.55 28.27 217.8 PBDT 299.16 188.86 91.96

PBT 143.95 127.81 194.47 PBT 89.48 1072.37 153.17

PAT 138.79 40.1 270.03 PAT 89.27 658.55 170.01

This table shows the different growth rates of MUL and Tata Motors Ltd over the three years. 8.3.1. LIQUIDITY RATIOS

1) Current Ratio

Maruti Udyog Limited’s current ratio was 1.166 in 2001-02. It remained the same at 1.670 in 2002-03. However, we find that in 2003-04, the current ratio zoomed to 2.282. Tata Motors, in 2001-02 had a current ratio of 0.768. in 2002-03, it decreased slightly to 0.756, and increased to 1.023 in 2003-04. so, apparently, we can say that MUL enjoys better short-term solvency than Tata Motors.

2) Quick Ratio

The quick ratio of MUL was 0.47 in 2001-02. It increased highly to 0.97 in 2002-03 and again zoomed to 1.57 in 2003-04. Tata Motors, in 2001-02, had a quick ratio of 0.20. in 2002-03, it decreased to 0.15, but increased highly to 0.52 in 2003-04. This comparison gives a stronger support to MUL’s better short-term solvency over Tata Motors Ltd.

3) Cash Ratio This ratio was 0.05 in 2001-02. It increased tremendously to 0.60 in 2002-03, and again leaped to 1.18 in 2003-04. Tata Motors, in 2001-02 had a cash ratio of 0.09, that decreased to 0.06 in 2002-03 and then to 0.44 in 2003-04. Here, we understand that MUL’s cash liquidity position has improved consistently, whereas Tata Motors’ cash liquidity position has consistently declined. Please refer to Appendix A7. 8.3.2. LEVERAGE RATIOS Leverage ratios help in assessing the risk arising from the use of debt capital.

1) Debt-equity Ratio The automotive industry’s debt-equity ratio in 2001-02 was 0.5. It came down to 0.4 in 2002-03,and again to 0.3 in 2003-04.The ratio was 0.289 in 2001-02. it decreased to 0.213 in 2002-03 and again to 0.119 in 2003-04. Tata Motors, in 2001-02, had a debt-equity ratio of 0.935. it decreased to 0.568 in 2002-03, and again to 0.353 in 2003-04. So, we can say that Tata Motors is a more highly leveraged company than Maruti Udyog Limited and must be having a lower cost of capital than MUL.

2) Interest – coverage ratio

MUL’s interest coverage ratio was 2.79 in 2001-02. it more than doubled to 6.11 in 2002-03 and more than tripled to 18.67 in 2003-04. Tata Motors, in 2001-02, had an interest-coverage ratio of 0.88. in 2002-03, it increased very highly to 2.59,

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and again to 6.59 in 2003-04. This comparison gives MUL a better score over Tata Motors in terms of its ability to pay the interest in case the profit declines.

8.3.3. ASSET MANAGEMENT RATIOS/ TURNOVER RATIOS These ratios reflect the ability of the company to effectively utilize the assets.

1) Inventory Turnover This ratio is an indicator of how fast the inventory is moving through the firm and generating sales.

a) Raw Materials Turnover: This ratio was 10.87 in 2001-02. It increased to 16.21 in 2002-03, and then to 26.81 in 2003-04. Tata Motors, in 2001-02, had raw materials turnover of 20.94. It increased to 25.24 in 2002-03, and then to 27.17 in 2003-04.

b) Finished Goods turnover: This ratio was 49.24 in 2001-02. It declined

in 2002-03 due to higher average inventory level to 40.35 in 2002-03. But it again leaped to 68.12 in 2003-04. Tata Motors, in 2001-02, had finished goods turnover of 11.93. In 2002-03, it was 12.69, and increased very highly to 18.75 in 2003-04. So, we see that Tata Motors has been more efficient in its raw materials management whereas MUL has more efficient in finished goods inventory management.

2) Debtors’ Turnover

This ratio was 12.21 in 2001-02. It decreased slightly to 12 in 2002-03, but then increased highly to 16.77 in 2003-04. Tata Motors, in 2001-02, had debtors’s turnover of 12.01. It increased to 17.00 in 2002-03, and more than doubled to 37.76 in 2003-04.

3) Debtors’ days This ratio was 29 in 2001-02, 30 in 2002-03 and decreased to 21 in 2003-04. This ratio was 30 for Tata Motors in 2001-02, 21 in 2002-03, and decreased rapidly to 9 in 2003-04.

Though the performance on this front has been almost same for both the companies, Tata Motors’ debtors’ turnover increased due to a huge increase in debtors in 2003-04.

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8.3.4. PROFITABILITY RATIOS

1) Gross Profit Margin The automotive industry’s gorss profit margin was 11.3% in 2001-02. It increased to 12.6% in 2002-03, and then to 12.9% in 2003-04. This ratio was 3.1 in 2001-02. it increased to 5.3 in 2002-03, and then substantially to 10 in 2003-04. Tata Motors, in 2002-03, had a gross profit margin of 12.7%, which increased to 14.5% in 2003-04. This clearly shows the productivity of Tata Motors has been better than MUL over the years.

2) Net Profit ratios We see from the above table that all the profit ratios have been consistently

increasing over the 2 years. So, we can conclude that MUL has been efficient not only in production but also in administration, selling, pricing (from increasing PBDIT), financing (increasing PBT), and tax management (increasing PAT). Especially, we find that there has been a quantum jump in the profitability of 2003-04 as compared to 2002-03. For Tata Motors. We see that the company got a major jump in profitability in 2002-03. Moreover, this is not due to any decrease in sale but huge increase in profits.

3) Return on Capital Employed The automotive industry’s return on capital employed was 14.3% in 2001-02. It increased to 16.9% in 2002-03, and again to 21.7% in 2003-04. MUL’s ROCE increased from 5.9% in 2001-02 to 6% in 2002-03. In 2003-04, the ratio jumped substantially to 15.2% in 2003-04. Tata Motors, in 2002-03, had a ROCE of 20.7% that increased to 25.9% in 2003-04. We can conclude that the earning power of Tata Motors post-tax has been much better than MUL.

4) Return on Net-Worth The automotive industry’s Return on Networth was 13.7% in 2001-02. It increased to 18.7% in 2002-03, and again to 24.9% in 2003-04. MUL’s Return on Net worth increased from 4.1 in 2001-02 to 4.9 in 2002-03. Then it increased very highly to 15.2 in 2003-04. Tata Motors, in 2002-03, had Return on Networth of 13.7% that increased to 25.3% in 2003-04. The conclusion is obviously that equity funds invested in Tata Motors enjoy a far higher return that that in MUL.

8.3.5. VALUATION RATIOS

1) Price-Earnings Ratio Maruti Udyog Limited was listed on the stock exchanges in 2003. Its average P/E ratio in 2003-04 was 18.4 compared to industry P/E ratio of 12.4. In 2003-04, Tata Motors’ average P/E ratio was 13.8

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2) Price-Book Value ratio

This ratio shows the contribution of the company to the wealth of the society. It shows the amount of wealth created for every rupee invested in it. MUL’s P/BV ratio in 2003-04 was 3.1 which was same as the industry figure of 3.1. In 2003-04, Tata Motors’ P/BV ratio was 3.5

8.3.6. PER-SHARE RATIOS

1) EPS MUL’s EPS was 79 in 2001-02. It decreased very highly to 5.1 in 2002-03, but increased to 18.8 in 2003-04 on the back of much higher profits. In 2002-03, Tata Motors’ EPS was 9.3 that increased to 25.9 in 2003-04.

2) Book Value Per Share

MUL’s Book value per share was 1956.2 for 2001-02. It decreased to 104.2 in 2002-03, but again increased to 123.7 in 2003-04. In 2002-03, Tata Motors’ Book value per share was 67.6 that increased to 102.6 in 2003-04.

9. CONCLUSION

We surveyed many potential customers and assessed their perception regarding various

brands of cars, mainly in low end A3 segments, and their various attributes. We collected

and analyzed data regarding 4 P’s of Maruti which enhanced our learning about the

marketing mix strategy taught in the curriculum. The project gave us a good exposure of

the business processes and challenges of Car industry. Utmost care was taken to gather

pertinent information in the various stages of the project, which helped in useful analysis

of the project.

10. RECOMMENDATION

1. MUL need to work on their advertisements. MUL are right now advertising in

Samaj and Dharitri. There should be billboard advertisements for more coverage

to increase brand recall in the local market.

2. Maruti Esteem doesn’t have a Brand Ambassador. Everybody relates Shah Rukh

Khan with Santro. Similarly Esteem needs to have someone to relate to.

3. MUL should work on their diesel model. Customers who are conscious about the

rising petrol prices would prefer good diesel models. In the long run diesel models

will be more profitable.

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4. Part of the promotion in the state should be taken care of by the Company.

Extensive consumer promotion should be done by the dealers in order to ensure

greater penetration into the local market. MUL should employ mediums such as

road shows and trade fairs.

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Appendix A1 (Questionnaire – I) Consumer Survey for various Brands of Cars Dear Sir/Madam, We, students of XIMB are conducting a survey for the automobile industry. We request your kind cooperation. Please tick ( ) the correct option. Name__________________________ phone No________________ Section 1 1. Are you planning to buy a car?

__Yes __No (If No, Thanks a lot for your time) 2. What is the price range in which you are planning to buy the car?

__ < 3 lakhs __ 3 – 5 lakhs __ > 5 lakhs (If your answer is 3-5 lakhs then kindly continue further, else please accept our gratitude for your kind cooperation. Thank you.)

3. What are the brands of Cars under your consideration?

_______________________________________________________

4. Please tell us if you prefer the brands specified on the horizontal row to the brands specified on the vertical column (YES/NO). Example: If you prefer Wagon R to Tata Indigo then please enter YES on 1st cell of 4th row, where in if you prefer Esteem to Wagon R, then please enter ‘NO’ on the 1st cell of 1st row.

Column 1 Wagon R Getz Santro Zen Indica Fiat Palio Esteem Ford Ikon Accent Tata Indigo 5. What are the attributes you look for before purchase of a car?

_______________________________________________________ 6. Please rate the attributes you look for before purchase of the car (Two features can get the similar rating 1- best 5- worst ).

__ Style __ Boot Space __ Feature __ Brand Image __ Status Symbol __ Resale value __ Parking space needed by the car __ Fuel efficiency __ Price __ Power/Performance __ Spaciousness __ After Sales Service

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__ Maintenance Cost 7. Rank the Brands and give the weights to the given attributes ( 1-max, 5- min) in that brand

Brands/attributes Rank

Overall Style Boot

Space Features Parking

Space Brand Image

Value for money

Wagon R Hyundai Santro Maruti Esteem

Tata Indigo Ford Ikon

Hyundai Accent Hyundai Getz

Fiat Palio * Note: Ranking of the features is based on individual merit and is not the comparative rating. 8. Please rate the following sources of information you look at before purchasing a car (Two features can get the similar rating 1- best 5- worst ).

__ Visit a company website __ Watch an advertisement __ Talk to friends and colleagues __ Test drive friends car __ Reviews and articles __ Evaluate discounts offered by the company __ Any other; please specify:

9. After deciding on the brand what would you like to do next?

__ Found out financing options __ Check up the rate of interest/EMI and tenure of loan __ Check-up down payments involved __ Check up the turn around time involved __ Evaluate discounts being offered by the dealers __ Any other; please specify:

45

Section 2 10. The car which you intend to buy is __Additional __Replacement __First 11. If your answer to Q.10 is additional or replacement, what is the brand you currently

own? _____________________ 12. Age of the Respondent____ 13. Gender _____ 14. Current Occupation__________________________ 15. Marital Status ____ If Married, How many Children do you have? ___ 16. What is your Total Monthly family Income? __ <20000 __ (20000- 30000) __ (30000-40000) __ (40000-50000) __ (50000-60000) __ > 60000 17. How many earning members are there in your family? __ 1 __ 2 __ > 2 18. Which TV Channels do you watch on a regular basis? __________________________________________________________________ 19. Which Newspaper/Magazines do you read? __________________________________________________________________ Thank you for participating in the survey.

46

Appendix A2 (Questionnaire – II)

Consumer Survey for various Brands of Cars Dear Sir/Madam, We, students of XIMB are conducting a survey for the automobile industry. We request your kind cooperation. Please tick ( ) the correct option. 1. Name __________________________ 2. Age of the Respondent ____ 3. Gender _____ 4. Current Occupation __________________________ 5. Marital Status ____ 6. If Married, How many Children do you have? ___ 7. What is your Total Monthly family Income? <20000 ? (20000- 30000) ? (30000-40000) ? (40000-50000) ? (50000-60000) ? > 60000 ? 8. How many earning members are there in your family? 1 ? 2 ? > 2 ? 9. Which TV Channels do you watch on a regular basis? __________________________________________________________________ 10. Which Newspaper/Magazines do you read? __________________________________________________________________ 11. Do you have a credit card?

Yes ? No ? 12. How often do you go to shop? Everyday ? Once in 2 days ? Once in 4 days ? Once a week ? Once in 2 weeks ? Once a month ?

47

13. Do you have a club membership? Yes ? No ? 14. Do you subscribe to any auto magazines or any automobile specific website? Yes ? No ? 15. If yes which one? _______________________________________________ 16. What is the price range in which you would like to buy a car?

< 4 lakhs ? 4 – 6 lakhs ? > 6 lakhs ? 17. What are the brands of Cars under your consideration?

_______________________________________________________

18. Please tell us if you prefer the brands specified on the horizontal row to the brands specified on the vertical column (YES/NO). Example: If you prefer Esteem to Ford Ikon then please enter YES on 2nd cell of 2nd row

Column 1 Esteem Ford Ikon Accent Tata Indigo Esteem

Ford Ikon Accent

Tata Indigo 17. Please rate the attributes you look for before purchase of the car

Not Imp Imp Very Imp

Style ? ? ? Boot Space ? ? ? Feature ? ? ? Brand Image ? ? ? Status Symbol ? ? ? Resale value ? ? ? Parking space needed by the car ? ? ? Fuel efficiency ? ? ? Price ? ? ? Power/Performance ? ? ? Spaciousness ? ? ? After Sales Service ? ? ? Maintenance Cost ? ? ?

48

18. Please tick the boxes under the attributes which you think is important for each brand.

Brands/attributes Style Spaciousness Features Parking Space

Brand Image

Value for money

Maruti Esteem Tata Indigo Ford Ikon

Hyundai Accent

19. Which of the following sources of information you look at before purchasing a car? Visit a company website ? Watch an advertisement ? Talk to friends and colleagues ? Test drive friends car ? Reviews and articles ? Evaluate discounts offered by the company ? Any other; please specify:

20. After deciding on the brand what would you like to do next?

Find out financing options ? Check the rate of interest/EMI and tenure of loan ? Check-up down payments involved ? Check up the turn around time involved ? Evaluate discounts being offered by the dealers ? Any other; please specify:

21. The car which you intend to buy is

Additional ? Replacement ? First ?

22. If your answer to Q.21 is additional or replacement, what is the brand you currently own? _____________________

If the answer to Q.22 is Maruti Esteem then continue with the rest of the questions. If not, answer only Q.30.

23. Which 3 features do you like most in Maruti Esteem? a. __________________________________ b. __________________________________ c. __________________________________

24. Which 2 features do you think Maruti Esteem lacks?

a. __________________________________ b. __________________________________

49

25. Which model do you think offers maximum value for money? ____________________________________________

26. What is the approximate distance of nearest Maruti showroom and Service Centre? ___________________

27. Do you think it is conveniently located for you?

Yes ? No ?

28. Which advertisement do you remember most vividly in this category? _______________________________________________

29. Are you satisfied with financing options offered by Maruti? Yes ? No ?

30. Would you wait for festive season to avail discounts or purchase as soon as you feel like buying it? Yes ? No ?

31. How do you feel after using the Maruti Esteem? Disappointed ? Satisfied ? Delighted ?

32. Will you suggest Maruti Esteem to anyone wanting to buy a car?

Yes ? No ?

Thank you for participating in the survey.

50

Appendix A3 (Findings of Survey) Demographic Characteristics The individuals on which the survey was conducted predominantly consisted of middle aged people who have a higher probability of having a car or buying a car. It was nearly an equal distribution between people in 20-30 and 30-50 age group.

Age Profile

48%

2038%

2141%

713%

<20

20-30

30-50

>50

Gender Profile

4179%

1121%

Male

Female

51

Occupation Profile

1917

97

0

5

10

15

20

Business Service Professional Others

No.

of

Res

pond

ents

Family Income level

2

14

16

8

4

6

0 5 10 15 20

<20000

(20000- 30000)

(30000-40000)

(40000-50000)

(50000-60000)

> 60000

Media Habits § TV Channels

According to the survey maximum number of people watch the Star TV network. This group is closely followed by people who watch the Zee TV Network and Sony TV Network.

§ Newspapers Read

The survey revealed that most number of people read The Times of India compared to other newspapers. The most read regional newspaper is The Samaj.

§ Magazines Read

The survey revealed that the magazine that was read by maximum no. of people was The Outlook, followed by India Today.

52

0

5

10

15

20

25

DoorD

arsha

n Fam

ily

Star F

amily

Sony

Family

Zee F

amily

AajTa

k, Hea

dlines

Toda

y

NDTV Fa

milyOthe

rs

TV Channels

Newspapers

0

5

10

15

20

25

The E

T

The H

indu

The T

OI

The I

ndian

Exp

The T

elegra

ph

The S

amaj

The D

haritr

i

53

0 2 4 6 8 10

The Week

The Readers' Digest

The India Today

The Outlook

The Business World

The Business Today

Oriya magazines

Others

Magazines

0

10

20

30

40

50

60

Per

cent

ages

Credit Card Club Membership

Life Style

Earning members

23, 44%

18, 35%

11, 21%

1

2

>2

54

Types of cars being bought by customers

8

5

15

0 5 10 15

Additional

Replacement

First

Type of car

First

Replacement

Additional

02468

10121416

No of respondents

Everyday Once in4 days

Once in2 weeks

Shopping frequency

Shopping frequency

Everyday

Once in 2 days

Once in 4 days

Once a week

Once in 2 weeks

Once a month

55

Psychographic Characteristics Attributes most valued

Attributes

0 20 40 60 80 100 120 140Parking spaceStatus SymbolResale valueAfter Sales ServicePower/PerformanceBoot SpaceMaintenance Cost

FeatureBrand ImagePriceFuel efficiencyStyleSpaciousness

ZenEsteem

Ikon Swift

Accent

Indica

Ford Alto Indigo Santro

0

1

2

3

4

5

6

7

Zen

Estee

m Ikon

Swift

Acce

ntInd

ica Ford Alt

oInd

igo

Santr

o

Brands under Consideration

Zen

Esteem

Ikon

Swift

Accent

Indica

Ford

Alto

Indigo

Santro

56

Maruti Esteem

0 10 20 30 40

Style

Boot Space

Features

Parking Space

Brand Image

Value for moneyA

ttrib

utes

Percentage

Tata Indigo

0 10 20 30

Style

Boot Space

Features

Parking Space

Brand Image

Value for money

Attr

ibut

es

Percentage

Ford Ikon

0 5 10 15 20 25 30

Style

Boot Space

Features

Parking Space

Brand Image

Value for money

57

Hyundai Accent

0 5 10 15 20 25 30

Style

Boot Space

Features

Parking Space

Brand Image

Value for money

Financing options

15, 32%

11, 23%8, 17%

4, 9%

7, 15% 2, 4%

Find out financing options

Check the rate ofinterest/EMI and tenure ofloan

Check-up down paymentsinvolved

Check up the turn aroundtime involved

Evaluate discounts beingoffered by the dealers

58

Appendix A4 (Product information of Maruti ESTEEM)

59

60

Appendix A5 (Sources and Distribution of Revenue) Sources of Revenue

Source of Revenue

91%

5%

1%

1%

2%

Sale of Vehicles

Sale of Spare parts/Dies& Moulds/components

Interest Received

Dividend Received

Other income

Sale of Vehicles 106793 Sale of Spare parts/Dies & Moulds/components 6047 Interest Received 761 Dividend Received 723 Other income 2292

Distribution of Revenue

Raw materials, stores, etc. 7047.9

Wages & salaries 201.1

Energy (power & fuel) 95.8

Indirect taxes (excise, etc.) 1943.8

Advertising & marketing expenses 547.4

Distribution expenses 118.8

Others 357.9

Non-recurring expenses 111.6

Distribution of Revenue

68%2%

1%

19%

5%

1%

3%

1% Raw materials, stores,etc. Wages & salaries

Energy (power & fuel)

Indirect taxes (excise,etc.) Advertising &marketing expenses Distribution expenses

Others

Non-recurring expenses

61

Appendix A6 (Financial Statement Analysis of MUL)

Gross Profit Margin

3.1

5.3

10

0

2

4

6

8

10

12

2001-02 2002-03 2003-04

Year

Gro

ss P

rofit

Mar

gin

Gross Profit Margin

Profit figures

0

2000

4000

6000

8000

10000

12000

14000

16000

2001-02 2002-03 2003-04

Year

Pro

fit (i

n R

s. m

illio

n)

PBDIT

PBDT

PBT

PAT

Income and Sales

95646 92580 116894

92512 90656 114216

020000 40000 60000 80000

100000120000140000

2001-02 2002-03 2003-04

Year

Value (Rs mn)

Income (Rs mn) Sales (Rs mn)

62

Liquidity Ratio

00.5

11.5

22.5

33.5

44.5

55.5

2001-02 2002-03 2003-04Year

Ratio

Val

ue Cash Ratio

Quick Ratio

Current Ratio

Debt-equity Ratio

0.289

0.213

0.119

00.050.1

0.150.2

0.250.3

0.35

2001-02 2002-03 2003-04

Year

Deb

t-eq

uity

Rat

io

Debt-equity Ratio

Interest-coverage Ratio

2.79

6.11

18.67

0

5

10

15

20

2001-02 2002-03 2003-04

Year

Inte

rest

-cov

erag

e R

atio

Interest-coverage Ratio

63

Inventory Turnover Ratios

0

5

10

15

20

25

30

2001-02 2002-03 2003-04

Year

Raw

Mat

eria

l Tu

rnov

er (i

n R

s)

01020304050607080

Fini

shed

Goo

ds

Turn

over

(in

Rs)

Raw MaterialTurnover

Finished GoodsTurnover

Debtors Turnover & Days

0

5

10

15

20

2001-02 2002-03 2003-04

Year

Deb

tors

' Tur

nove

r

05101520253035

Deb

tors

' Day

sDebtors' Turnover

Debtors' Days

Fixed Assets Turnover

2.85 3.05

4.54

00.5

11.5

22.5

33.5

44.5

5

2001-02 2002-03 2003-04

Year

Turn

over

Rat

io

Fixed Assets Turnover

64

Return Ratios

0

5

10

15

20

2001-02 2002-03 2003-04

Year

Ret

urn

on C

apita

l E

mpl

oyed

(%)

0

5

10

15

20

Ret

urn

on

Net

wor

th(%

)

Return on CapitalEmployed (%)

Return on Networth(%)

Per-share Ratios

0

5

10

15

20

2002-03 2003-04

Year

EP

S

90

100

110

120

130B

ook

Valu

e pe

r sh

are EPS

Book Value per share

65

Appendix A7 (Comparison with Competitors)

Income Growth (%)

-10

0

10

20

30

40

50

2001-02 2002-03 2003-04

Year

% G

row

th

Tata Motors

Maruti

Sales Growth (%)

-10

0

10

20

30

40

50

2001-02 2002-03 2003-04

Year

% G

row

th

Tata Motors

Maruti

Current Ratio

0

0.5

1

1.5

2

2.5

2001-02 2002-03 2003-04

Year

Cur

rent

Rat

io

Tata Motors

Maruti

Quick Ratio

0

0.5

1

1.5

2

2001-02 2002-03 2003-04

Year

Qui

ck R

atio

Tata Motors

Maruti

66

Cash Ratio

0

0.5

1

1.5

2001-02 2002-03 2003-04

Year

Cas

h R

atio

Tata Motors

Maruti

Debt-equity Ratio

0

0.2

0.4

0.6

0.8

1

2001-02 2002-03 2003-04

Year

Deb

t-eq

uity

Rat

io

Tata Motors

Maruti

Industry

Interest-coverage Ratios

0

5

10

15

20

2001-02 2002-03 2003-04

Year

Inte

rest

-cov

erag

e R

atio

Tata Motors

Maruti

67

Raw Materials Turnover

0

5

10

15

20

25

30

2001-02 2002-03 2003-04

Year

Raw

Mat

eria

ls T

urno

ver

Tata Motors

Maruti

Finished Goods Turnover

0

20

40

60

80

2001-02 2002-03 2003-04

Year

Fini

shed

Goo

ds

Turn

over Tata Motors

Maruti

Debtors' Turnover

0

10

20

30

40

2001-02 2002-03 2003-04

Year

Deb

tors

' Tur

nove

r

Tata Motors

Maruti

68

Gross Profit Margin

02468

10121416

2001-02 2002-03 2003-04

Year

Gro

ss P

rofit

Mar

gin

(%)

Tata Motors

Maruti

Industry

Return on Capital Employed

0

5

10

15

20

25

30

2001-02 2002-03 2003-04

Year

Retu

rn(%

) Tata Motors

Maruti

Industry

Return on Net Worth

0

5

10

15

20

25

30

2001-02 2002-03 2003-04

Year

Retu

rn(%

)

Tata Motors

Maruti

Industry

69

Earnings Per Share

0

5

10

15

20

25

30

2002-03 2003-04

Year

Earn

ings p

er sh

are(R

s.)

Tata Motors

Maruti

Book Value Per Share

0

20

40

60

80

100

120

140

2002-03 2003-04

Year

Book

Valu

e Per

Sha

re(R

s.)

Tata Motors

Maruti

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