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Old 16th January 2014, 21:01   #1
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Thumbs up Business Today: How Maruti bounced back after the 2012 labour strife

Came across this very insightful article on Business Today

Full article here: God Is In The Detail

Maruti has bounced back by focusing on little villages, small customers and tiny gains in factories. The big things are a cleansing of the workforce, capacity building and R&D.

Chairman R. C. Bhargava (left) with MD and CEO Kenichi Ayukawa at the final inspection segment of Maruti's assembly at Gurgaon
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Excerpts From the Article

Market Share
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India Network
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Stock Price
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Profit
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Mayank Pareek, Maruti's COO - Marketing and Sales
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Quote:
Originally Posted by Mayank Pareek, Maruti's COO - Marketing and Sales
Last September while travelling in Gujarat he noticed several outlets along the highway which were bigger than dhabas but smaller than motels. He stopped to talk to the owners. It turned out they raked in Rs 1 lakh every day. Once back in office, he devised a special package for them on the Omni van, which has space to carry goods. The package gets steady sales of three to four dozen every month.

On a drive from Bangalore to Coimbatore he noticed a number of granite polishing units. These were doing well despite the slowdown. There is a special package for them now.

He asked his team at a brainstorming session which section of society did well during bad times. The answer was temple priests, who receive more offerings as people pray more. Maruti now has a special package for priests, which started at the Trimbakeshwar temple in Nashik.

All told, Maruti has 332 special packages for small and niche customer segments, each of which buys 30 to 50 vehicles every month. "Every drop counts," says Pareek. "We are counting each drop and these are adding up to something big. This year our sales growth is 1.3 per cent, but the rural market has grown more than 18 per cent."
M. M. Singh, Head of Manufacturing
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Originally Posted by M. M. Singh, Head of Manufacturing
M. M. Singh has been with Maruti for 30 years, the last 10 as head of manufacturing. He is a much respected figure on the shop floor. Having observed the conveyor belt in the engine assembly at the Gurgaon factory, he said it was stopping every now and then. The plant manager refused to believe him. As far as the eye could see, the line was running smoothly. Singh told him to install a counter on the conveyor and report the findings in a week.

The plant manager came running to him after three days. The conveyor, he said, was pausing 800 times every day: only for a fraction of a second, but it was pausing all right. The problem - related to tightening of nuts and fool proofing - was fixed and the output went up by 20 to 30 engines a day without anybody even noticing the change.

The levels indeed change fast. Every year Singh exceeds his cost reduction target. It was Rs 351 per vehicle for April-November last year, but he had touched Rs 628 by the middle of December. Before you scoff at the figure, multiply it by the annual production of 1.2 million. The total manufacturing cost has fallen nearly 40 per cent in seven years.

When Maruti introduced the K series of engines in 2008/09, its tool cost - a key indicator of production cost - worked out to Rs 185. Singh said he wanted it brought down to Rs 22, which was the tool cost for the old engine. In five years it has come down to Rs 25. (The old engine, though, has moved to another level at Rs 13.)

The guiding principle at the factories is that the machine and the conveyor must not be made to wait. O. Suzuki is known to say that nobody should be paid for walking. Moreover, if a worker walks 20 steps to get to a component bin, that is 40 steps for each component. If his shift produces 200 cars, that is 8,000 steps for him, leaving him exhausted.

So the components have been brought closer and closer to the assembly line worker, not an easy task given the layout of car factories. The walk is now a tenth of what it used to be a few years ago. In some cases, there is no walking needed. In these cases, Singh has moved to a new level, monitoring the bending and lifting by each worker. Components are now placed to his left and right and as much as possible at a comfortable height.
The Road Ahead!
Business Today: How Maruti bounced back after the 2012 labour strife-marutigrowthlarge_011314115727.jpg

Last edited by deetjohn : 16th January 2014 at 21:13. Reason: Adding text.
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Old 16th January 2014, 21:12   #2
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Default re: Business Today: How Maruti bounced back after the 2012 labour strife

Nice article with interesting facts. What shocks me is that the amount of costs they have cut and the increase in in profits due to lesser manufacturing costs. Since they arent under losses, I woould be happy if they increased part quality in their lower end cars. However am satisfied with my SX4 wrt quality. Not the same with my WagonR. And no need to speak about the alto800 :O

But one thing I would always respect the company for is, it has inverted most of the market speak about the company losing to competition every time a new model was launched in the lower segments. The products arent technologically advanced or eye catchers. Still, they are proven and very familiar in every household.
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Old 16th January 2014, 22:25   #3
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Default re: Business Today: How Maruti bounced back after the 2012 labour strife

The success story of Maruti is literally 2 forked. One is the manufacturing/product success and the other one is the marketing success.

This story clearly brings out the brightest of the ideas post their troubed times with a single goal of bouncing back. Except for its second biggest rival Hyundai, all other companies and their honchos are just firmly sitting behind the glass windows of their showrooms and offices without even trying to understand the customer they are serving.

One more case in point of Maruti success even if it is not listed here is its cashless insurance which began with the tieup with National Insurance popularly NatMar. This provided hasslefree cashless insurance claims that can be availed on the event of an accident when the car will be repaired and delivered without any fuss of following up with insurance companies.

It does not stop at that, many here would vouch for the religious manner in which the local MSIL dealer follows up to get it renewed year on year so that the customer remain in their fold all the times. This not only ensures premium retention but also customers going back to the MASS in case of any eventuality. And yes it is a well know fact where the money can be made - service over sales.
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Old 16th January 2014, 22:47   #4
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Default re: Business Today: How Maruti bounced back after the 2012 labour strife

Good article! Thanks for sharing deetjohn

What caught my eye especially (apart from the turn around) is "A buoyed Maruti is now gearing up to take the battle to the enemy camp. On the anvil, according to Bhargava, are two sports utility vehicles to get a foothold in the market that Renault's Duster and Ford's Ecosport are running away with."

I was under the impression that its only 1 SUV in the lineup - XAlpha. Two would really turn out interesting...

Last edited by vinjosep : 16th January 2014 at 22:50.
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Old 16th January 2014, 23:20   #5
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Default re: Business Today: How Maruti bounced back after the 2012 labour strife

They will have an SX4 based crossover which maybe the chairman is hinting about. The only thing pending is the introduction of either the 1.6MJD or Marutis own line of oil burners, though I would prefer the former They just have two SUVs, and still plonk the same 1.3l mjd in them no matter FGT or VGT or anything. We need a 1.6l with FGT in one car and the higher end SUV should have a VGT based 1.6. And there is no end for imagination I feel.
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Old 16th January 2014, 23:39   #6
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Default re: Business Today: How Maruti bounced back after the 2012 labour strife

Quote:
Originally Posted by vinjosep View Post
I was under the impression that its only 1 SUV in the lineup - XAlpha. Two would really turn out interesting...
Quote:
Originally Posted by audioholic View Post
They will have an SX4 based crossover which maybe the chairman is hinting about.
Might be trying to pass off Suzuki Hustler as an SUV. It is what is featured in that pic. And there is a 4x4 version too of the Hustler. http://www.suzuki.co.jp/car/hustler/
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Old 17th January 2014, 01:44   #7
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Default re: Business Today: How Maruti bounced back after the 2012 labour strife

Sorry to question all the Maruti bonhomie here but, how exactly has it bounced back (not sure how the labor strife matters)?

There is absolutely no denying that MS is the premier auto manufacturer in India; and will probably remain so for a good amount of time to come.

But, in my opinion, that can be mostly attributed to the brand equity that MS has built and the fact that MS cars are on the less expensive side w.r.t. competition and the ease/cost of ownership/maintenance.

Today, there is hardly a MS car in every segment that stands out in a way that is a clear, no-brainer choice (leaving aside the cost factor). Swift, perhaps.

While I understand and agree that cost itself is a huge factor, especially in India, I feel that it cannot be the sole metrics of judging how a manufacturer is performing.

The cars are fickle beyond imagination, the features/safety is silly and their idea of "special edition" is hilarious.

My family bought 2 cars from different segments in the last 2 years; not once did MS even cross our mind.

I appreciate the article but MS need to start delivering and have good product launches.
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Old 17th January 2014, 08:49   #8
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Default re: Business Today: How Maruti bounced back after the 2012 labour strife

Quote:
Originally Posted by deetjohn View Post
Might be trying to pass off Suzuki Hustler as an SUV. It is what is featured in that pic. And there is a 4x4 version too of the Hustler. http://www.suzuki.co.jp/car/hustler/
Quote:
Originally Posted by libranof1987 View Post
.....

The cars are fickle beyond imagination, the features/safety is silly and their idea of "special edition" is hilarious.

My family bought 2 cars from different segments in the last 2 years; not once did MS even cross our mind.

I appreciate the article but MS need to start delivering and have good product launches.
@deetjohn: Hustler... to me it looks like a WagonR on steroids. But then you never know what the "bright" might market as an SUV.

@libranof1987: Aptly said. They have products which sell good, but really don't stand out. However, the brand recall is higher for MS outside the metros. This is where it really outshines the others. The number of outlets & service centres contribute a lot. Though lackluster, the entry level models are in great demand among the first time buyers. They don't depreciate much either.

Hope the new YL1 is a welcome change in MS lineup.
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Old 17th January 2014, 09:24   #9
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Default re: Business Today: How Maruti bounced back after the 2012 labour strife

Quote:
Originally Posted by libranof1987 View Post
Sorry to question all the Maruti bonhomie here but, how exactly has it bounced back (not sure how the labor strife matters)?

---I appreciate the article but MS need to start delivering and have good product launches.
The article is not talking about how good/ bad Maruti' products are compared to competition. But how MSIL steered out of a very bad mess which was the labour trouble in Manesar. An employee was killed in the factory by the mob, MSIL lost a lot of money and market share, had a lot of bad press and it took months to bring the production back to the regular levels.

And they really have bounced back if you ask me. Despite its size, MSIL remains nimble and does take into account even the smallest of things, be it sales and marketing or production efficiency at the floor. The article brings out enough stories with key people to highlight this. And compared to the usual PR tosh by ET, this article is well researched and very nicely put. So, wanted to share it with T-BHPians.

But, I agree that the gains in efficiency shouldn't be at the cost of build quality!
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Old 17th January 2014, 09:55   #10
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Default re: Business Today: How Maruti bounced back after the 2012 labour strife

Quote:
Originally Posted by libranof1987 View Post
But, in my opinion, that can be mostly attributed to the brand equity that MS has built and the fact that MS cars are on the less expensive side w.r.t. competition and the ease/cost of ownership/maintenance.
In a country like India where there are crores of middle class people, the cost factor itself is more than enough to make and break a purchase decision.

Quote:
Today, there is hardly a MS car in every segment that stands out in a way that is a clear, no-brainer choice (leaving aside the cost factor). Swift, perhaps.
Even with millions of Swifts on the road, it still stands out in the crowd.
Let me ask: what other cars from other manufacturers stand out in the crowd? Probably an EcoSport, Duster and an Innova. What else?

Quote:
The cars are fickle beyond imagination, the features/safety is silly and their idea of "special edition" is hilarious.
I agree with their special editions, but what about the safety features provided by Tata, Chevrolet and Hyundai in their cars, especially in the base variants? Nothing to boast about.

Quote:
My family bought 2 cars from different segments in the last 2 years; not once did MS even cross our mind.
That doesn't mean Maruti is inferior or other manufacturers are superior. The mentality that "I will not buy what others buy" counts. And by no means you are a reference point to any one here!

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Old 17th January 2014, 11:19   #11
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Default re: Business Today: How Maruti bounced back after the 2012 labour strife

Maruti definitely has the early mover advantage in India but one cannot deny that they have never been complacent regarding their top position in market share. They have really never displayed a lackluster attitude since probably they know that Indian customers apart from cars, budget pricing, service standards, also need a positive attitude from the manufacturer and in most of the cases, MSIL has delivered. Ability can take you to the top, but it takes character to stay there.


Quote:
Originally Posted by libranof1987 View Post

The cars are fickle beyond imagination, the features/safety is silly and their idea of "special edition" is hilarious.
Agreed..and they have been punished by the same market too for it. Almost every time.

Quote:
Originally Posted by libranof1987 View Post
My family bought 2 cars from different segments in the last 2 years; not once did MS even cross our mind.
That is a your personal take so as to which cars to consider. I would not consider cars from many such manufacturers, esp Europeans. But that does not take away the fact that they are really well built and safe.

Quote:
Originally Posted by libranof1987 View Post
I appreciate the article but MS need to start delivering and have good product launches.
MSIL, like all other manufacturers is concerned about the monthly numbers, market share and the bottom line. As long as they are meeting their targets and most of the times, overshooting them, there is nothing which they should do special. In fact, they have good products across the range. As an old school of thought - 'why fix something that ain't broke!'
For the time being, they just need to do what they have been doing to keep things rolling in their favour!

Regards,
Saket

Last edited by saket77 : 17th January 2014 at 11:29.
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Old 17th January 2014, 12:21   #12
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Default re: Business Today: How Maruti bounced back after the 2012 labour strife

Great article and kudos to Maruti for their great going. Really they have come a long way over the years. All the best for future. With 14 new launches, future looks more brighter to me

Now coming to point some people saying here about quality. So as per some people Maruti is not giving us cars with good quality, design, safety features & what not. I would like to ask them, so why not others are giving then? As per my understanding, Maruti gives very good products to Indian people as per their budget with optimum quality, great reliability, best service, easy availability etc. Why others are not giving then? Who is stopping them to do so? We have seen Toyota trying it with Liva, people have mostly rejected it, why? Because it has pathetic interiors, bad design etc. What Honda gave us as a VFM hatch, a Brio. It also has bad interiors and very odd looking back. Again most people rejected it. These are just examples. Okay, Toyota has Innova & Honda has City which are very good products, but at certain cost. People are buying that also. No denying in that. But they will get limited business only with that. These all Multinational brands interested only in limited business with very high profit margins. They don't want to compete with less margins with products like Alto, Omni, Wagon R etc.

Why can't then other manufacturers make good products at the price in which Maruti gives us with high reliability, service, quality etc? No body is stopping them at all. Is there any body who is trying to compete Omni, Eeco? Both are very good MUV's for Indian conditions (specially in small towns, villages, Cities) at very low cost. Others should target that then. Alto is largest selling car in India for last so many years. Why cant others then make competitive product at that price or may be below that price to break Alto records? Same with Wagon R. Instead of just talking and criticizing Maruti, i would be happy if others come up with better products than Maruti at that price. We need to understand one basic thing here, most Indians has very limited budget to buy a car. In fact, for more than 80% people in India, car is still a luxury for them. In India, mostly people buy products like cars mainly for their utility and not for the luxury, so they look for VFM cars only with peace of mind which Maruti provides them
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Old 17th January 2014, 15:01   #13
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Default Re: Business Today: How Maruti bounced back after the 2012 labour strife

MSIL have been long churning out products that suit the Indian setup to the T. Yes there have been failures like the A-Star, Estilo but there numbers are not entirely disappointing when we compare them with that of Fiat.
Suppose the MSIL products are better on the overall value when compared with other cars. There cars are trouble free when compared to the huge numbers they manufacture, sell & service. They can make their cars with a better build when compared to German cars but am sure it will upset their winning formula. Ask Fiat as to why Punto is not doing the numbers which Swift does.
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Old 17th January 2014, 16:03   #14
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Default Re: Business Today: How Maruti bounced back after the 2012 labour strife

In my opinion, the main reason for this success is the commitment and attachment they have for and with Indian customers. Their sales teams respect every single visitor they have to their showrooms, not like some other brands where people feel bad after visiting and interacting with their sales teams. Not only the sales even the A.S.S also is good of Maruti. I really like Maruti for these two reasons. You can find lakhs of people like me and this might be one reason for Maruti to keep good numbers.

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Old 17th January 2014, 16:11   #15
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Default Re: Business Today: How Maruti bounced back after the 2012 labour strife

Giving the market what it wants is the success of every product. Maruti started with the 800, which is a small and ideal car for a family, capable of every road in India and lower in cost for both product and maintenance. For the first time, India saw a proper car. Maruti continued their journey by producing more India friendly cars and expanding their service network. This resulted in every city, town and village having a Maruti network and so the majority prefers it, still!

Way to go Maruti!
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