Strategy in Practice: An Analysis of Maruti Suzuki

This report provides a comprehensive strategic analysis of Maruti Suzuki, a leading automobile manufacturer. It begins with an introduction to strategy and its application within the automotive industry. Task 1 explores the growth opportunities and emerging threats within the global automobile industry using PESTLE analysis, followed by an assessment of the sector's attractiveness using Porter's Five Forces model. Task 2 focuses on Maruti Suzuki's internal capabilities, identifying its unique resources and applying value chain analysis to understand its activities. The VRIO framework is then used to evaluate these resources for competitive advantage. Finally, Task 3 proposes and evaluates new strategic options for Maruti Suzuki, considering factors such as the current market trends, competitive landscape and the firm's internal strengths and weaknesses using the SAFE criteria. The report concludes with a list of references to support the findings.

STRATEGY IN PRACTICE
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Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
A) Growth chances and emerging threats in automobile industry environment...................3
B) Automobile sector attractiveness......................................................................................5
TASK 2............................................................................................................................................7
A) Identification of unique resources for Maruti Suzuki .....................................................7
B) value chain analysis applies to identify organization’s activities.....................................8
C) Application of VRIO framework....................................................................................10
TASK 3..........................................................................................................................................11
A) Suggestions in form of set of new strategic options.......................................................11
B) Evaluation of chosen strategic option by using SAFE criteria.......................................13
REFERENCES .............................................................................................................................14
Appendix........................................................................................................................................15
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INTRODUCTION
Strategy refers to an activity taken by manager to gain one of more benefits and achieve
set goals and objectives. It includes setting priorities and aims, mobilizing key resource and
identifying actions to achieve an aim to execute plan or tactic. Strategy development for a
venture means to develop a procedure which guide companies in recent time to successful
further. The current assignment will be based on Maruti Suzuki, which falls under category of
leading auto mobile manufacturers in the world. It is a subsidiary of Suzuki Motor Company
establish in Japan. Brand is known as the biggest passenger car firm which account for over 50%
of domestic car market. It has operated its venture within auto mobile industry where number of
skilled workers and engineers are working and performing daily task or act together in order to
serve its best and excellent products or services to wide consumer base.
This study will be divided into three tasks. Task one will explains progress opportunities and
current emerging trends in chosen sector environment. It will define industry attractiveness and
justify unique resources for company. Furthermore, this report will clarify usage of value chain
and CRIO concept. It will explain possible suggestions in context of new strategic options for
chosen company and justification in regard to specific one.
TASK 1
A) Growth chances and emerging threats in global automobile industry environment
The Global automotive sector encompasses a wider range of organizations and businesses
included in development, design, manufacturing, advertising and selling of motor vehicles. It
begins in 1860s with a hundred of producers that pioneered horseless carriage. There are a lot of
barriers occurred in growth and success of chosen sector, which may define by using specific
models. The scope of this analysis is to determine threats and opportunities in the context of
global automobile industry.
PESTLE analysis-
Political factor-
In case of global automotive sector, increase taxes or tax rate, is one of the biggest
emerging threats for chosen industry (Pandit and et.al., 2018). As it put negative impact on
supply chain and production operation of firms in term of increasing products price and cost of
manufacture procedure (Kumar and et.al., 2020). Because of this element all the organizations
that have been operated under this sector may experience a lot of negative things in form of
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maximizing pressure for manufacturing vehicles under budget without comprise in quality. The
tax has increased recently in smaller level due to (Vital, Essential and desirable) VED rates being
linked to inflation via RPI (Mattioli, Wadud and Lucas, 2018). As it possess as threat, that
impact negatively upon financial performance of sector. When government increase charges or
tax rate, it directly impacts trading and outsourcing process of companies in term of increasing
cost of product purchase and production management. When tax rates increased in the context of
global automotive sector, they may pay extra charges on trading process which may decrease
profitability and bring challenge to manage everything accordingly.
Economic factor-
Due to COVID- many people losses their jobs which made them unable to manage their
living standards. It increase unemployment rate more than last certain years. In term of
opportunity, this issue give chance to global automotive sector to hire new people in cheaper rate
from talent pool. Unemployment rate within UK and other countries has getting higher because
of COVID (Bell and Blanchflower, 2020). Global automotive sector have chance to hire those
applicants who are ready to work within profitable sector by following terms and conditions.
Due to increasing competition within job market, unemployment rate within UK may affected in
form of acceleratory number of unemployed people.
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It may give the best chance to strengthen workforce by hiring and selecting experienced
new candidate. This factor make hiring cheaper, which is quite beneficial for sector as it may
save money. This issue may consider as opportunity because it provide chance to recruit skilled
people who are not working in any brand or company.
Social factor-
In recent time, people need and demands relate to cars and other vehicles are changes as
they want to buy cars which provide safety while driving and offer entertainment sources. It can
put negative impact on overall sector because it manufactures products by considering needs of
its target market, which get changed due to safety purpose and other reasons. It may occur in
form of threat that put negative affect upon automotive sector. Furthermore, it can be said that
global automotive sector is influenced by changing people preferences and socio cultural trends
(Lin and et.al., 2019). Fluctuation in social factors like these two may possess threat for entire
industry, which is not beneficial for it. In recent time, people demand and decision related to
vehicle purchase is changing, as they consider and follow varied market trends. It is fact that
restrictions affect people who love driving as it discourages them and impact in negative manner.
Technology factor-
Technology advancement is an external factor which provides the best opportunity to
global automotive sector. Industry may grab this chance by using advanced technologies in the
context of manufacturing or offering self-drive facilities to buyers, which is quite beneficial and
essential as well in term of increasing sales and productivity levels. Self-drive is one of the
emerging and most trending technology that many companies while operating under automotive
sector has been used to provide excellent experience to customers (Green, 2020). It allows
industry to add value for buyers by adding innovation in form of self-driven facility. Global
automotive sector in recent time has manufactures the best quality vehicles by self-driving
vehicle technology. It is one of the best opportunities, which sector has grab and implement in
term of manufacturing a self-driven cars that had capability to ride without input from a human
operator. This opportunity brings a lot of benefits to sector in term of increasing customer base,
profitability and productivity as well as sales.
Legal factor-
Change in government regulations and rules govern for automotive sector could impact in
positive manner because overall industry and its companies has followed excellent standards of
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business governance, they follow legal laws and policies in concern of consumers’ safety and
well fare. It is one of those issues that sector solve and grow even better. It can be said that
fluctuation in regulations and policies may emerge as an issue which is not good for global
sector.
Furthermore, global auto-motive sector also complies its own practices according to
equality act 2010 terms and conditions in order provide the best facilities to staff at workplace
which in return boost productivity and profitability even better. This factor also considers as
growth opportunity which give from power to take effective action. Changes in Equality act
2010 impacting sector in positive manner, bring create growth and success opportunity as it
boost the productivity even better than last years.
Environmental factor-
Consumer and government are concern for environmental safety and nature protection
and because of that they put pressure on global automotive sector for reducing carbon foot,
which really very essential. It can consider as current emerge opportunity for industry which
impact existing business plans and strategies in positive manner. Global automotive sector gets
affected positively due to this factor because it has introduced and manufactured number of
vehicles that protect environment (Settey, Gnap and Beňová, 2019). This issue may consider as
emission level. In London, it has introduced ULEZ zone and will charge drivers driving non
ULEZ cars in UK (Morganti and Browne, 2018). By grabbing this opportunity sector may grow
even better and get unexpected success.
B) Automobile sector attractiveness
Industry attractiveness can define as further growth and profitable potential of a market,
which can determine by using specific concept or model that is mention below-
Porter’s five forces model-
Bargaining power of buyers -
Degree of this force is high because dealers are more aware about advanced features and
valuable services offer by automobile sector that has been demanding by many customers
(Lapko and Trucco, 2018). With great awareness, they conduct bargaining activity that may put
negative impact on those who are not adopting and improving quality of vehicles by adding
excellent features as it decreases sales and profitability and also leads to minimize operational
efficiency of firms, which is not suitable for current business performances. There are several
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organizations accessible in automobile sector that satisfy its customers by providing satisfactory
product and services to them as it gives change to target market for bargain. High bargaining
power of dealers affecting the way firm offer its services as they may improve operational
efficiencies to manufacture the best and most attractive cars, which help to gain attention of
consumers towards purchase (Chesula and Kiriiny, 2018). Furthermore, high bargaining power
allows each buyer to put pressure on sector and its companies in context of setting prices. A
dealer holds strong power, which they may use to decrease price tag and to make changes in
existing practices of those sectors with which they make a business contract.
Bargaining power of suppliers-
Extent of this force is low because accessibility of suppliers within global automobile
industry is wider. It gives organizations chance to build strong relationship with its supplier
which is quite beneficial in term of producing and selling quality products. Accessibility of this
force cater global automotive sector opportunity to retain existing suppliers who could not be
able to increase cost of supply chain activity and impact in negative manner. Suppliers are the
main stakeholder of company who could influence existing pricing structure of brand. Sector has
number of suppliers. In form of opportunity, companies within chosen industry conduct
collaborative practice with other stakeholders as well as it strengthens and enlarge distribution
network and allow firm to operate its venture all over the world.
Threat of new entrances-
Degree of this force is low because while entering into automotive sector a huge
investment is required which is not possible for each brand. Because of this element global
automotive sector may sustain for longer period of time without facing any issues in form of
competition by new entrances. It gives organization power to retain and attract new buyers who
are able to pay in exchange for quality products or vehicles. Due to this force, company could
develop plan for gaining further business opportunities. Most of the companies due to demand
relate to huge investment in context of business establishment within new sector or market, take
step back, which is quite common thing.
Threat of substitute products and services-
Extent of this factor is medium because there are many substitute items or services like
bikes, cycles and scooters available in the world that put negative impact on sales and
profitability global automotive sector. Innovation of E-Bike can consider as emerging threat for
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chosen automotive brand which affect negatively upon its customer base and financial
performance. It can lead to decrease chance for reaching at global level and building
international presences. Threat of substitute is one of the porter’s five forces that drive attention
of potential buyers towards other innovative goods. The main reason behind moderate degree of
this force is average accessibility of luxury and conformable transportation services.
Competitive rivals between existing companies-
Rivalry within automobile industry between existing brands like Maruti Suzuki, Toyota
and other is high because each brand adopts varied techniques and approaches to give tough
competition to each other and gain competitive advantages. This force could put negative impact
on chosen sector in term of increasing pressure for manufacturing vehicles according to buyers
needs and preferences as well as safety comfort which is actually very essential to consider.
Toyota and other brands while operating their business within similar sector attempts hard
work in order to gain competitive edge and become global leader that put negative impact on
selected firm. Market growth of global automotive sector and its companies has increased as
their exports grew by 14.50%. Degree of this factor is high because market is growing faster, but
still some companies have same market share, for which they attempt to increase. Just because of
this reason, competition has gets higher.
By summing up above discussion, it has been determined that global automotive sector has
overcome the negative impact of above forces. By taking varied initiatives, industry has
increased its profitability. Low bargaining power of suppliers giving the best chance to global
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automotive industry as it helps to retain potential suppliers who are loyal and trustable. Global
automotive industry is attractive, because it has less substituted items or services, which drives
the sales of section higher.
TASK 2
A) Identification of unique resources for Maruti Suzuki
Experienced workers (strength)
In context of selected company, human resource or experienced workers are the key
resource, because they all are capable and able to support firm while competing with existing and
new rivals (Ariffin and Sahid, 2018). Organization has 40,000 number of employees who all are
talented, skilled and knowledgeable and able to manufacture cars or other vehicles according to
exact needs and demands of their consumer which is really a very influencing act. With this
resource company is capable to do a lot of attempts especially for satisfying its potential buyers
and gaining attention of new.
Other key asset that boost productivity and profitability of Maruti Suzuki even better than
its competitors is its financial performance. Organization increase 6% of its sales by selling
vehicles to consumers. Current resource rose 56 and stood at 124 Billion, while actual assets rose
10 percent and stand at 170 billion in FY19. It can analyse that sum liabilities and assets stood at
640 billion as opposite to 602 billion which can witness progress of above discussion percentage.
Financial resources is a concept that covers all financial funds or profits of companies,
like Maruti Suzuki. It includes specific amount of money, which enable company to gain
competitive edge by increasing productivity. Financial resources may included in category of
unique resources that firm need to get success and grow venture. In form of money, organization
may collect financial resource for business growth purpose from varied sources such as bank
loan, Angel investors etc. Firm may obtain benefit from its financial resource by making
investment within profitable projects and product manufacture operation which in return enable
firm to produce car that people like the most and seek to purchase for longer period of time.
Ratio Analysis
ROCE
Particulars Formula 2018 2019
Profitability Ratios
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Return on capital employed
Net
operating
profit/Empl
oyed
Capital 13.12% 11.49%
Employed Capital
Total assets
– Current
liabilities 2099487 2062308
Net operating profit 275440 236887
Interpretation
It could be interpreted from the above ratios that there has been decline in ROCE of
company which shows that management of company is not able to make effective utilisation of
the existing resources. It could be stated that management is required to deploy some
unproductive and useless assets to improve the ROCE (Barauskaite and Streimikiene, 2021).
Gearing Ratio
Gearing Ratio 2018 2019
Long-term debt 387154 217785
Shareholder's equity 1340047 1482750
Debt-equity ratio 0.29 0.15
Interpretation
The gearing ratio shows that debt equity ratio of company is very low. There is very low
financial risk in the organisation therefore making investments in such company will not be at
risk. However company should raise funds using the debt which will provide financial benefit to
company and reduce cost of capital (Pongrangga and Kurniawati, 2020).
Current Ratio
Liquidity Ratios 2018 2019
Current assets 1818988 1622317
Current liabilities 1241341 1339662
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Inventory 49962 59850
Quick assets 1769026 1562467
Current ratio
Current
assets /
current
liabilities 1.47 1.21
Quick ratio
Current
assets -
(stock +
prepaid
expenses) 1.43 1.17
Interpretation
Current ratio reflects the liquidity position of the company and it could be evaluated that
current ratio has declined to 1.21 from 1.47 in previous year. It is essential for the company to
have strong liquidity ratio to meet the working capital requirements. Current ratio has to be
improved by making changes in cash operating cycle (VU, TRUONG and DINH, 2020).
Outlets (Retail shops)-
Along with above two valuable and unique resources, Maruti Suzuki can obtain benefits
in term of increasing operational efficiencies and profits margin from its physical outlet which
enable company and its workers to focus on manufacture vehicle without facing issues because
of congested areas or workplace. It is key strength of company. It can be analysed that firm with
300 physical stores conduct essential business activities in ethical manner. Its outlets are spread
across 323 cities and towns in the world where experience and skilled workers are serving their
services and satisfy consumers by selling vehicles according to lifestyle, budget and
requirements. All three resources can give frim power to be competitive for longer time period.
Intangible asset-
Brand reputation in automotive sector is considered as intangible resource that help to
gain attention of customers. The brand image of Maruti is quite good, because it gives consumers
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the best and unexpected driving experiences which also gives value for money. It is one of the
most popular automotive companies the world that has gained the trust of each customer. It is
popular because of offering range of vehicles.
It has been identified that by manufacturing each vehicle according to needs and
expectations as well as preferences of buyers, company has gained better success and built its
strong brand image in market.
B) value chain analysis applies to identify organization’s activities
Maruti Suzuki Company and its management conduct a lot of practices, actions and
activities in order to sustain business in automotive sector, retain customers, increase sales and
build top position in market. With all these acts, firm conduct more that can identify by using
particular model which is value chain.
Infrastructure Manageable
infrastructure
Legal
department
Classified
departments
HRM Manage staff
performance
Hire new
workers
Training and
development
Solve
workers
problems
Use
motivational
techniques
R&D Use market
analysis tools
Gather
information
about key
market trends
Collect data
about current
market
situation
Use
advanced
technologies
Conduct
effective
market
research
Procurement Used
advanced
technologies
Build
connection
with trustable
suppliers
Design
vehicles
Analyse key
customers
trends
Manage
supply chain
Primary
activities ->
Inbound
logistics
Conduct
Operations
Six Sigma
Outbound
logistics
Supply
Marketing
and sales
Use social
Services
Insurance
distribution
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