Operations Management at Maruti Udyog

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Case Details:

Case Code : OPEA001
Case Length : 18 Pages
Period : 2003
Organization : Maruti Udyog Limited
Pub Date : 2004
Teaching Note :Not Available
Countries : India
Industry : Automobile

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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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Maruti Udyog was the only manufacturer to have improved consistently since 1997 and has been a leading catalyst for driving up the overall Customer Satisfaction Index industry average. Maruti's industry leading performance was a result of strong performance on service-related factors.¹

- J.D. Power Asia Pacific, 2002.

Introduction

In 2003, Maruti Udyog Ltd. (Maruti), a joint venture between Suzuki Motors² of Japan and the Indian government, dominated India's automobile market with a 54% market share.³ Maruti had the widest product range among Indian car manufacturers, with ten basic models and more than 50 variants. Three out of the top-five-selling car models in India (Maruti 800, Zen and Omni) belonged to Maruti. The company dominated the Indian small car market with a 100% share in 'A' segment and 36% in 'B' segment.⁴ In 2003, Maruti produced 359,960 vehicles, operating at a capacity utilization of 103%, against the industry average of 57.8%.⁵ Maruti was ranked 12th amongst the "Most Respected Companies" in India by Business World.

( During four consecutive years from 2000 to 2003, J.D.Power Asia Pacific, had ranked Maruti No. 1 in the India Customer Satisfaction Index study⁶.

In 2002 and 2003, based on India Total Customer Satisfaction Study⁷ conducted by NFO Automotive in India, the Maruti 800 was ranked No. 1 in the "Economy" segment, the Maruti Zen (petrol version) was ranked No. 1 in the "Premium Compact" segment while the Maruti Esteem was ranked No. 1 in the "Entry Mid-size" segment.

Even though Maruti was well ahead of its other rivals, it realized competition could not be underestimated. Hyundai, Tata Motors and Ford were all formidable rivals. In this context, the company's executives wondered what more could be done to improve operational efficiency, cut costs and launch new products.

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1] www.jdpa.com

2] Eleventh largest vehicle manufacturer in the world and the fourth largest manufacturer in Japan.

3] CMIE database, June 2003.

4] Business India, 26th May 2003. Segment A: cars priced lower than Rs. three lakhs, Segment B: cars priced between Rs. Three and five lakhs.

5] Draft Red Herring Prospectus, Maruti Udyog Limited, May 2003.

6] This annual study, which began in 1997, assessed customer satisfaction with product quality and dealer service. The factors used for measurement were problems experienced, quality of service advisor, service performance, and service timing and facility appearance.

7] The study was based on responses from new car purchasers during the first three years of ownership. The analysis focused on the performance of over 30 new car models in the Indian passenger car market at the vehicle segment level to provide comparison amongst similar groups of vehicles in the key areas of sales satisfaction, product quality, vehicle performance and design, after-sales service, brand image and cost-of-ownership.