The Emerging Issues In Financial Management Commerce

Table of Content

Maruti Udyog Ltd. ( MUL ) , a subordinate of Suzuki Motor Corporation of Japan, has been the leader of the Indian auto market for approximately two decennaries. Its fabrication works, located some 25 Km South of New Delhi in Gurgaon, has an installed capacity of 350,000 units per annum, with a capableness to bring forth about half a million vehicles. The company has a portfolio of 11 trade names, including Maruti 800, premium little auto Zen, Swift, international trade names Alto and Wagon R, off-roader Gypsy, mid-size Esteem, luxury auto Baleno, the MPV Omni, Versa and Luxury SUV Grand Vitara XL7. In recent old ages, MUL has made major paces towards its end of going Suzuki Motor Corporation ‘s R and D hub for Asia. It has introduced upgraded versions of Wagon R, Zen and Esteem, wholly designed and styled in-house.

Passenger autos section highly competitory: The rider auto section in India is highly competitory. Along with MUL, the other strong participants are TML, Hyundai, Ford India, Honda Siel autos, General Motors India etc. The tabular array below gives a snapshot of the cardinal theoretical accounts of MUL and the competitory theoretical accounts of its rivals.

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The cheapest Indian auto launched in 2008: MUL ‘s cardinal rival – Tata Motors has launched the cheapest auto in India i.e. Tata Nano priced at around Rs.100,000 which is highly attractive to the Indian consumer – peculiarly the younger and in-between category households. The styling and design of the auto have been completed and paradigms are being tested within the works. It is a rear-engine, 4-5 place, 4-door auto with about a 30 horsepower engine. MUL had its M800 which is the lone offering in the ‘Mini ‘ section with no rival for the last 25 old ages. The competitory auto from TML has created a newer section at a monetary value point which is lower than M800. Further, the new auto from TML has diesel offering which is farther upside for the new auto. This auto would draw off volumes from the bike section ( which is a entire market of 8m ) and besides the first clip auto purchaser which chiefly used to travel to MUL before the launch of Tata Nano.

Absence of a successful merchandise on the ‘Diesel ‘ side: Out of the entire autos sold in India, around 20-22 % runs on Diesel. This proportion is expected to increase in the hereafter as the crude oil monetary values maintain on increasing everyday. However, the built-in cost benefit of around Rs.14/litre between gasoline and Diesel coupled with the fact that Diesel autos by and large give higher milage has resulted in some of the new auto purchasers being attracted to diesel. MUL traditionally has been highly strong in the gasoline engineering ( due to its association with Suzuki ) . It did hold a few theoretical accounts with Diesel option – Zen and Esteem in the yesteryear. However, they have non been that successful and presently MUL does non sell any diesel vehicle.

Commodity monetary value hazard: The chief natural stuffs for the company are steel, non-ferrous metals, gum elastic and technology plastics. These monetary values have increased in the last 12-18 months as reflected by the lifting natural stuff to gross revenues gross ratio tendency in the last 2 old ages. This has resulted in rise of auto monetary values by the company excessively which would impact the gross revenues volume for the company.

Macro economic factors: The demand for the Company ‘s merchandises is affected by alterations in the macro economic conditions like involvement rates, strike responsibility rates, rising prices, oil monetary values, etc. Over the last few months, there have been important alterations in the economic environment. There have been negatives like hardening of involvement rates and oil monetary value escalation. Though the company is exposed to all these factors, the company ‘s presence in diverse merchandise sections, in diverse geographicss and in diverse fuel sections helps to distribute the hazard.

Investings and Use: The Company is doing heavy investing in the countries of capacity enlargement, R & A ; D and selling substructure. Sustained demand of merchandises is critical to bring forth returns on such investings. Capacity use shall be a cardinal parametric quantity to guarantee concern viability both for the Company and its channel spouses. It besides does a careful cost benefit analysis to guarantee, the investing generates a competitory advantage to assist procure volumes.

Rise in gasoline monetary values and turning popularity of other utility fuels like CNG is another menace to Maruti. There is besides a menace from R & A ; D investing by Toyota and Honda in Hybrid autos. Hybrid autos could run on both gasoline and gaseous fuels.


Increasing menace from the new participants: Most of the major planetary participants are present in the Indian market ; few more are expected to come in. Financial strength assumes importance as high are required for edifice capacity and keeping adequateness of working capital. Access to distribution web is of import. Lower duties in station WTO may expose Indian companies to menace of imports.

High Rivalry within the industry: There is acute competition in choice sections. ( Compact and mid size sections ) . New transnational participants may come in the market.

Low Market strength of providers: A big figure of automotive constituents providers. Automotive participants are apologizing their seller base to accomplish consistence in quality.

Increasing market strength of consumers: Increased consciousness among consumers has increased outlooks. Thus the ability to introduce is critical Product distinction via new characteristics, improved public presentation and after-sales support is critical. Increased competitory strength has limited the pricing power of makers.

Low to medium menace from replacements: With consumer penchants altering, inter merchandise permutation is taking topographic point ( Mini autos are being replaced by compact or mid sized autos ) .Setting up incorporate fabrication installations may necessitate higher capital investings than set uping assembly installations for semi knocked down kits or complete knocked down kits. In recent old ages, even though the ratio of gross revenues to capacity ( an of import index of the ability to make break-even volumes ) of the domestic auto makers have improved, it is still low for rather a few auto makers in India. India is besides likely to progressively function as the sourcing base for planetary automotive companies, and automotive exports are likely to derive increasing importance over the average term. However, the growing rates are likely to change across sections.


The Company has established an appropriate hazard direction model. All such hazards have been identified and categorised based on their nature and significance. The elaborate extenuation programs for each such hazard have been formulated, affected and reviewed sporadically. Appropriate hazard appraisal and minimization processs are established. The procedure for explicating a defined hazard appraisal model encompassed, inter-alia, a methodological analysis for measuring and placing hazards on an on-going footing, hazard prioritising, hazard extenuation, monitoring program and comprehensive coverage on direction of endeavor broad hazards. An Executive Risk Management Committee ( ERMC ) is in topographic point to reexamine the hazard direction activities of the Company on a regular footing. The composing of the Committee includes the Managing Director and all Whole-time Directors. Hazards are evaluated by ERMC. In add-on to the company degree hazards, ERMC besides reviews, from clip to clip, any new hazards that may originate due to market kineticss and alterations in the concern environment. The Audit Committee and the Board of Directors besides review the position of the hazard direction activities in the Company.

Few schemes followed by MUL are:

Pricing of merchandises that cater to all client sections.

Offering one halt store to clients or making different gross watercourses like Maruti finance, Maruti Insurance, True Value ( for used autos ) , etc.

Shifting of merchandises from clip to clip.

Realization of importance of vehicle care services market.


The Company attained its highest of all time domestic gross revenues and exports. There are many positive developments that augur good for the hereafter: the success of new theoretical accounts including two in the saloon section, client grasp for the new Suzuki design doctrine of bold and aggressive autos, success of the Company ‘s new Diesel plan, a gross revenues and workshop web that is profitable and turning, scale-up in R & A ; D strength and of class, top evaluations in client satisfaction for eight old ages in a row. By all histories, competition will escalate in the hereafter as more participants enter, new theoretical accounts are launched and new market sections are created. In peculiar, with several markets internationally staying level or demoing slow growing, planetary makers are directing investings and concentrate towards the Indian market.

While the Company enjoys a strong client connect and has an first-class path record, it is nearing the hereafter afresh and taking nil for granted. The Company has laid down a clear roadmap for the following three old ages, and is working towards a mark of domestic sale of 1 million units and exports of 200,000 units by 2010-11. It is spread outing capacity, beef uping the web, enrolling endowment, working on following coevals engines and heightening its cost and productiveness enterprises to achieve these marks. The new theoretical account launch program remains aggressive: the Company is committed to establish A World Strategic Model Kizashi in India in few months.

Macro economic factors like GDP growing, rising prices, involvement rates, currency alterations, financial policies and trade good monetary values have a strong bearing on the Company ‘s concern. Barring trade good monetary values, the other factors have been, by and big, positive for the rider auto industry over the past few old ages. While there is some reversal in the macro environment, it remains to be seen whether this is a short term phenomenon or a more sustained displacement in the tendency. The Company has decided on certain critical enterprises to retain leading in the long term. These include investings in marketing substructure such as trade name Centres and regional stockyards for autos and parts, all of which will heighten client satisfaction. The development of in-house R & A ; D capableness, combined with strong support from Suzuki in footings of theoretical accounts, engineering and best patterns, will besides assist the Company strengthen leading in the hereafter.

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