Business Economics Assignment: Maruti Suzuki's Market Analysis

This assignment analyzes Maruti Suzuki's market position in the Indian automobile industry, focusing on its competitive landscape, market structure, and strategic challenges. It explores the firm's competitive advantages, including its brand recognition and pricing strategies, while also examining the challenges posed by intense competition, fluctuating input costs, and labor expenses. The analysis delves into the opportunities available to Maruti Suzuki, such as the rising middle-income population and the availability of skilled engineers. Furthermore, the assignment discusses factors determining automobile demand in India and the relevance of cross and income elasticity of demand to Maruti's managerial decisions. The analysis provides recommendations for sustaining profitability and navigating the dynamic market environment.

Maruti Suzuki
1. The market structure prevalent in the Indian Automobile industry is perfect competitive
market structure because;
a. There was fierce competition from firms which entered the market freely due to liberalization
b. No single manufacturer was able to set the price at which it wanted to dell the cars, but rather
left it to be determined by the forces of demand and supply.
c. There were many players in the market who were disorganized and operating independently
of each other.
The Maruti’s competitive advantages
It had built its brand to the extent that more often it found its products competing among themselves
in the market. Secondly, it had a long serving market share command in the industry hence spent little to
attract customers. Instead, it only intensified promotion to retain customers and to build customer loyalty.
Thirdly, it was capable of setting prices, which were relatively, low to fore other players out of the market.
The manner in which Maruti can sustain its profitability in the future
The firm should conduct a robust research and development to come up with efficient vehicles to
outsmart competitors. Secondly, the raw materials used in the assembly process should be obtained locally
to reduce the cost of manufacturing as opposed to when the materials are imported. Thirdly, the firm should
enhance its efforts to enter many international sceneries. That is, diversifying its markets to many countries
across the globe to increase its rate of returns.

2. A. The challenges for car manufacturers in Indian Market
The first challenge crippling investment in the region is associated with stiff competition. Some
firm go ahead and use unhealthy competition methods such as price wars. The presence of price ceilings in
the region discouraged investment. This, prevented manufacturers from setting their own prices even if the
conditions were hurting their survival. Increased price for raw materials reduced the profit margins for the
manufacturers. Finally, another factor that deterred prosperity of the car manufacturing industry in India
was the increased cost of labour. This was accessioned by the skyrocketing levels of inflation in the
country.
B. The opportunities for the car-manufacturing firms in Indian Market
The industry enjoyed an increased market due to liberalization. This made the mid-income level
families to rise in the region, resulting into a steady rise in demand. Availability of highly trained engineers
in the country ensures ready work force with skills to design automobiles in accordance with the
technology demand.
3. Factors that determine the demand for automobiles in India
One determinant of demand is the marginal propensity of the citizens to spend. This was evident
when liberalization took place in India resulting into rise in the levels of incomes of individuals causing the
demand for vehicles to rise in the country. Secondly, the other determinant of demand is the cost of
production, which is determined by the prices of factors of production. Which the prices of factors of
production such as labour, capital and raw materials are high, the prices of the products also go up.

Relevance of cross and income elasticity of demand to Maruti’s managerial decisions
It was noted in the report that when the income of the citizens increased, the demand for cars also
rose in the region. Managers of Maruti can study the changes in the incomes of the citizens to determine the
quantity of cars to manufacture. This can help to guard against incidences of excess demand or excess
supply of the cars.

References
Cakir, M., & Nolan, J. (2015). Revisiting concentration in food and agricultural supply chains: the welfare
implications of market power in a complementary input sector. Journal of Agricultural and
resource economics, 203-219.
Askerov, S. G., & Askerov, A. S. (2017). ETHONOPHYSICAL ANALYSIS OF THE RELATIONSHIP
BETWEEN MONOPOLY AND COMPETITION. Journal of Economic Sciences: Theory and
practice, 74(1).