Maruti Udyog Limited - The Pricing Dilemma

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Case Details:

Case Code : MKTG100
Case Length : 15 Pages
Period : 1995-2004
Pub Date : 2005
Teaching Note : Not Available
Organization : Maruti
Industry : Passenger Car
Countries : India

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts

The Product Line

The Indian passenger car market was divided into various segments and sub-segments on the basis of price, size (i.e. length of the model and its weight) and other factors (including engine capacity). MUL had a presence in all the segments and sub-segments...

The Pricing Strategy

Due to the fierce competition in the Indian passenger car industry, price emerged as an important factor affecting the purchasing decisions of customers. Since it had been in the industry for more than two decades, and as a market leader, MUL adopted aggressive pricing strategies.

The company had products at various price points (Refer Exhibit IV for a comprehensive list of MUL's products, their variants and prices). In the early 2000s, when the passenger car industry was witnessing stagnation, MUL slashed the prices of its various models, to revive the industry...

Promotion and Distribution

In the early 2000s, MUL also focused on promotion and distribution to face intense competition. The company devised various innovative promotional strategies. With interest rates declining from 12% to as low as 8% in automobile finance, MUL used financing as a major tool to drive up its car sales. The overall percentage of cars being financed through automobile loans increased from 65% in 1998 to over 85% in 2003...

The Result

By 2004, the competition in the Indian passenger car industry had further intensified. However, MUL retained its leadership position mainly due to its aggressive pricing strategy. In December 2004, MUL reported an 18% rise in vehicle sales helped by a sharp increase in exports and rising demand in the domestic market.

Domestic sales increased by 11.4 percent amounting to 37,153 units, while exports jumped 78 percent to 6,675 units. After the price reductions and aggressive promotion, M800 and Alto sold in huge volumes in India...

Exhibits

Exhibit I: Comparision of Features of Different Models in 'A2' Segment
Exhibit II: Visual of M800
Exhibit III: Visual of Alto
Exhibit IV: MUL - Prices of Various Models
Exhibit V: Top Ten Performers