The Maruti - Suzuki Conflict|Business Strategy|Case Study|Case Studies

The Maruti - Suzuki Conflict

            
 
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Case Details:

Case Code : BSTR029
Case Length : 11 Pages
Period : 1997-2002
Organization : Maruti Udyog Limited, Suzuki Motor Corporation
Pub Date : 2002
Teaching Note : Available
Countries : India
Industry : Automobile & Automotive

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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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Background Note

Till the early 1980s, the Indian passenger car industry offered limited choice to the customers, with only two popular models in the form of Hindustan Motors' (HM) Ambassador and Premier Automobiles' (PAL) Padmini. The government not only controlled the price mechanism in the industry, but the entry of foreign players was also strictly regulated.

However, the scenario changed in 1981, when the GoI itself entered the car business by establishing MUL by acquiring the assets of Maruti Ltd.6 In October 1982, the GoI signed a licensing and joint venture agreement with SMC where in Suzuki acquired the 26% share of the equity.7 Suzuki's history dates back to 1903, when Michio Suzuki founded Suzuki Loom Works in Hamamatsu in Shizuoka, Japan. For the first 30 years, company focused on the development and production of complex machines for Japan's silk industry. In 1937, the company diversified into building cars and in 1939 began manufacturing cars for the Japanese market. But due to the Second World War it had to stop the production of cars and concentrated on the manufacture of the looms.

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The company shifted its focus back to automobiles with the termination of war and collapse of cotton market in 1951. In 1952 it manufactured its first motorized bicycle called 'Power Free'.

In 1954, the company changed its name to Suzuki Motor Co. Ltd. and was by then producing around 6,000 cars per month. With 57 production centers all over world, its manufacturing and assembly network expanded to over 26 countries all over the world. Company established 22 automotive manufacturing facilities in 17 countries. Suzuki's vehicles were sold through 134 distributors in 175 countries. By March 2001, Suzuki's net sales were 1,600, 253 billion and it was one of the top 5 automobile manufacturers of the world. MUL manufactured passenger cars at its factory in Gurgaon, Haryana with an installed capacity of 350,000 vehicles. The first product, Maruti 800 was launched in 1984. Consumers hitherto without any choice rushed to buy the vehicle. Maruti 800 earned the tag of being the 'people's car...'

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6] Maruti Ltd. was set up in 1971 and wound up by the High Court order in 1978. Maruti Ltd. was engaged in the manufacture of vehicles, bus bodies, automobile parts and fittings.

7] Besides MUL, SMC had another joint venture in India, TVS-Suzuki, with the TVS group to manufacture motorcycles. The venture, started in 1982 was terminated in late 2001.