Question

OM Practice: Provide one example of a company who you believe has good operations. Explain your choice - what aspects / examples of the company’s operations supports your company choice. If your previous response has not done so, list two big OM innovations – explain each innovation and why it is a big idea (its benefits).

Answer 1

The company chosen here is Maruti Suzuki. It is an automobile giant in India.

To begin with, I would like to take a look at the top 20 cars by sales volume in India for the month of May 2019. Needless to say, Maruti Suzuki today is the ruler of Indian roads, leader in each segment of passenger automotive technology. Maruti’s dominating success has made it into a barometer to judge the wellbeing of the auto tech business. The reason behind Maruti Suzuki turning into a virtual benchmark, is due to the solid performance crosswise over segments for the passenger vehicle segment that has generally been divided over the value-premium continuum.

Analysts state that Maruti’s rivals have a restricted number of successful models, and that is the reason they think that it’s hard to hold customers or cross-sell products. Maruti is known to have an extensive range of new and old cars which stay as hot sellers. Let’s have a look at the various operational strategies adopted by Maruti to capture more than 50% of the Indian market:-

• Maruti ensures that it has presence in every segment of passenger car market by constantly introducing new cars or upgrading its existing portfolio to maintain consumer interest. It has allowed no scope for other manufacturers to gain ground, Throughout the world, there are a different segment of cars say Hatchback, Crossover, Sedan/Saloon, SUV/MUV, Hybrid FCV, etc. But, our very own Maruti Suzuki innovated something at the compact segment and called it as entry level sedan by introducing Dzire. It was a paradigm shift which made it an overnight success which tempted all other auto majors to enter that particular segment in India which eventually leads to the launches of Xcent (Hyundai), Amaze (Honda), Zest (Tata), Ameo (Volkswagen), Etios (Toyota), Aspire (Ford), Sail (GM/Chevrolet), Verito (Mahindra), Classic (Linea-Fiat), etc making it one of the most competitive segment today.

• Maruti has been successful in catching the nerves of the Indian people. It knows exactly the right price people are willing to pay for any feature and consequently, it sets the price range of its models well within their pocket limits. Moreover, it has wide range of cars in the same segment, a strategy which definitely its competitors lack. Currently, it has 16 models across 6 segments (Hatchback, SUV, MUV, Sedan, Crossover, Mini Van) which is much higher than its rivals providing a plethora of options for every customer before he buys one.

• ·Maruti’s parent company Suzuki is known in Japan for making low cost cars as compared to its competitors Toyota, Honda and Nissan. Maruti itself in India started with the low cost cars for Indian people. But in the recent years, it has tried to break this notion with the development of “NEXA” showrooms. These showrooms have been developed to market the premium cars such as Baleno,Vitara Brezza equipped with latest features .And this very move has proved quite successful in taking business away from Honda Jazz, Volkswagen Polo, Hyundai i20,Tata Bolt which were known in the market as quality premium cars.

• Maruti Suzuki has a very strong number when it comes to dealership network. It has 1820 sale outlets in 1471 locations compared to Hyundai’s 718, Tata’s 539 and Mahindra’s 436 and Honda’s 264 dealership network. Maruti has been able to change the value proposition of its products from just sales to Sales, Service and Spare Parts. It has wide range of service centres and its spare parts are cheap and quite readily available which is quite lucrative for the customers.

• Maruti banks on its local engineering to account for its low cost cars. Instead of importing parts from Suzuki Japan, it makes sure that almost everything from gearbox to leather seats are manufactured locally which gives a distinct competitive edge.

• Maruti Suzuki started to focus on rural markets very early much before its rivals which is another important factor for its sales volumes. Currently, MSIL’s sales from rural markets are about 33% which is very high compared to its rivals. In addition, Maruti cars have an excellent resale value

It is the combination of excellent operational strategies and consistent efforts that Maruti today dominates the Indian automotive industry. Let us try to look into the future of Maruti’s business through Porter’s five forces:

1. Threat of New Entrants: It is quite difficult for new entrants to enter the automobile industry because of large investment required. Another major barrier is the level of competition from the existing brands. Brand image is a major competitive advantage for the existing brands. Any new brand would have to focus a lot on engineering and product quality.

2. Bargaining Power of Suppliers: It is quite weak because most of them are small players and switching from one supplier to another is not difficult for the brands.

Moreover, Maruti has control over suppliers due to its large volumes.

3. Bargaining Power of Buyers: It is moderately strong. The buyers are price sensitive mostly and would switch to another brand that offers lower prices. There are no big costs involved in switching to another brand or to alternative mode of transportation.

Maruti focusses on building customer loyalty through design, quality and by offering competitive prices.

4. Threat of Substitutes: It is weak because none of the alternative modes of transportation (buses, taxis, planes) provided the convenience that owning an automobile does.

5. Competitive Rivalry in the Industry: No Surprise, it’s quite strong in India.

Thus the market analysis suggests that Maruti is to remain the dominant player in Indian automotive market over a long time with respect to its competitors.