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Maruti Suzuki India Limited SWOT & PESTLE Analysis

Last Updated : 13 Jul, 2017

OVERVIEW

Name of the Company: Maruti Suzuki India Limited

Business Sector: Automobile

Operating Geography: Asia, India, Global

About the Company: Maruti Suzuki is leading automotive manufacturer in passenger vehicles category in India. It was established in 1981 as a JV between GOI and SMC. It has an installed production capacity of 1.5 million units a year. Maruti Suzuki employs close to 13200 professionals across its various products portfolio and various business units.

Revenue: INR 77,266.2 crore – FY ending March 2017

SWOT & PESTLE Analysis

The SWOT analysis for Maruti Suzuki is presented below:
Strengths
Weaknesses
1. Improved business performance and leading market presence
2. Huge product portfolio and successful new product launches
3. Strong marketing through Nexa and high customer satisfaction level
4. Improving financial performance and rising EPS
1. Interior facility and features to improve to compete with foreign brands
2. Less market command over premium vehicles and SUV segment
Opportunities
Threats
1. Improving economic scenario in domestic market1. Slowdown of economy and expenses due to demonitisation
2. Foreign players setting manufacturing facilities in India
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Strengths

1) Improved business performance and leading market presence: Maruti Suzuki has been the leading passenger vehicle maker with a market share at 46.8% an increase of 1.8% points over the previous year. Passenger cars have improved by 9.6% vis-à-vis 7.9% of the whole industry. UVs have improved by 38.4% vis-à-vis 6.3% of the industry, Vans have improved by 11.2%% vis-à-vis 3.6% of the industry, PVss have improved by 11.3% vis-à-vis 7.2% of the industry. Maruti Suzuki has registered overall sales at 14,29,248 units an increase of 10.6% over the previous year including both domestic as well as exports market.

2) Huge brands portfolio and successful new product launches: Maruti Suzuki has 16 products under its belt customised to deliver huge segment of consumers in the country. Maruti Suzuki has done three successful products launches recently with overwhelming demand in the market. It’s cross-over Baleno has registered 44000 sales in a very close time since its launch in October last year. Over 35k orders have been registered for Vitara Brezza, new compact SUV from Maruti Suzuki. Maruti Suzuki has also forayed into smart hybrid technology with its products – Ertiga and Ciaz at an affordable rates to the customers.

3) Strong marketing through Nexa and high customer satisfaction level: Maruti Suzuki has strengthened its current network with Nexa showroom launches primarily aimed for premium segment cars. It has total 1,820 outlets while 125 NEXA outlests have been established clocking over 70k sales through the channel. Maruti Suzuki also received the top position in aftersales service amongst mass market selling brands as measured by J.D. Power. Maruti Suzuki has also provided mobile services to around 90k customers through 1425 mobile vehicles this year.

4) Improving financial performance and rising EPS: Maruti Suzuki has experienced growth in both topline as well as bottomline compared to last year. Sales has improved by 16 % while PAT has improved by 23% to INR 45,714 Mn. EPS has improved to INR 151 an y-o-y increase of 23%.

Weaknesses

1) Interior facility and features to improve to compete with foreign brands: Maruti Suzuki has to improve its interiors while competing with the foreign brands – Volkswagen, Hyundai, Nissan, Ford etc. The foreign players are little expensive but commands better driving ambience as well as comfortable ride for the passengers.

2) Less market command over premium vehicles and SUV segment: Maruti Suzuki is not an attractive option for the younger generation due to lack of sporty features and aesthetics of the products. Maruti Suzuki has also failed to produce superior premium range of products in the market due to inferior engine specifications as well as less improved suspensions leading to lesser comfortable rides. Maruti Suzuki has also got to improve its product positioning in the SUV market in order to compete with the traditional brands – Mahindra, Tata as well as foreign brands – Mercedes, Audi etc. These drawbacks has also limited Maruti Suzuki’s entrance into advanced markets around the globe.

Opportunities

1) Improving economic scenario in domestic market: India is going to experience a stabilised & healthy GDP growth around 7%. Due to improved infrastructure development in the country, there has been improving road connectivity which has led to improved road traffic thus driving sales of passenger car vehicles. Also, there is improvement in job market that has led to better disposable income for the common people to use cars instead of public traffic. There has been improving car rides either through taxi aggregators or purchases by the consumers. The domestic passenger car market has experienced growth of 7.64% in 2016 compared to 3.9% in 2015.

Threats

1) Slowdown of economy and expenditures due to demonitisation: Demonitisation has led to slowdown of the country’s economy which leads to lesser expenditure capacity of people. Decreasing amount of business transactions and its volumes has led to lesser earnings for the people that may lead to lesser sales for the company. Also natural calamities like the floods at Chennai affects the business volumes in the affected areas. It leads to decreasing purchasing power among the mass population and affects the sale of the small vehicles which are the volume drivers for the company. Also lesser disposable incomes means lesser commercial use of vehicles like taxi/ cab market which also affects the sale of the vehicles.

2) Foreign players setting up manufacturing facilities in India: India with its make-in -India policy has opened doors to a number of foreign players – Renault, Nissan, Ford, Fiat etc. These companies are establishing local manufacturing facilities and with improved technology as well as efficient operations are able to provide advanced products at a competitive price. Also, the foreign players are using India as a manufacturing base for export market which is also affecting Maruti Suzuki’s dominance in the emerging markets around the globe.

Maruti Suzuki SWOT analysis has been conducted by Anindhya Sadhu and reviewed by senior analysts from Barakaat Consulting.

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The PESTLE analysis for Maruti Suzuki is presented below:
Political
Economical
1. Rise in protectionism measures for business opportunities
2. Make in India initiative
1. Positive development in global economy a healthy sign for export sales
2. Economic growth of domestic market
Social
Technological
1. Enhanced customer requirements and perceived social value
2. Rise in car-pooling & shared mobility
1. Increase in embedded technologies driving safety and performance and implementation of green technologies
Legal
Environmental
1. Greater attention and more initiatives to reduce environmental impact due to automobiles
2. More legal compliance measures to increase passenger safety
1. Growing criticism towards environmental pollution created by vehicles
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Political

1. Rise in protectionism measures for business opportunities: There has been rise in protectionist measures across the globe among most of G20 countries. This has led to rise in prices of the products sold in those markets rendering the products less price effective in compared to the locally produced vehicles.

2. Make in India initiative: Maruti Suzuki can enjoy more investment opportunities under the more liberalised initiative of GOI allowing for 100% FDI. It has been coupled with better infrastructure, increased tax holidays and setting up of special economic zones which promise better investment opportunities for the companies.

Economic

1. Positive development in global economy a healthy sign for export sales: There are good signs of recovery of global economic activities and rising fuel prices again, global economy has been expected to rise by 3.5% in 2017. There has been improvement in European market which is expected to grow by 1.5% in 2017. The BRIC countries represents a huge share of pie of global economic growth close to 30%, amongst these automobile sales is expected to rise at a CAGR of 4.6% till 2020. China has been a huge market for automobiles which has experienced a rise of 30-40% annual growth rate for most of the years in the last decade. Automobile sector is expected to grow by 7-8% in the next few years and is expected to reach 30 million units by 2019. Beyond these, Latin American, African and South-east Asian markets are expected to rise by 2.3%, 3.6% and3.6% respectively which are hotspots of global footprint driving the export sales of Maruti Suzuki.

2. Economic growth of domestic market: Gross Development Product of Indian economy is expected to grow at a healthy above 7.5% for the next fiscal year which is above most of the emerging countries. Passenger vehicles are expected to grow at 7-8% per annum and it is expected to reach 5 million sales by 2020. The 7th pay commission which is expected to be declared by the end of this year is expected to be one of the major drivers of the passenger segment in tier -I & II cities and towns also.

Social

1. Enhanced customer requirements and perceived social value: Consumers of today are more dependent on personal vehicles for commuting instead of public transport. This has in one hand beefed up the demand for passenger vehicles while on other hand experienced the rapid rise in demand of consumers in the emerging markets in line with that of in the developed markets. Consumers are looking for better comfort calling for better suspension, digitization and automation of most of the functions coupled with assisted driving. Embedded technologies like incorporation of radar, camera coupled to steering and braking activities as well as innovation in power train technologies. Passenger vehicle ownership has been seen a sign of perceived social status. Young population is looking for better ergonomics promising a more youth and dynamic appearance.

2. Rise in car-pooling & shared mobility: Among the middle-income population, for high frequent commuters, car-pooling has been one of the trending habits for many. It has been further beefed by the online cab aggregators – Uber and Ola. It is likely to pull down private ownership of the vehicles and thus the companies should have to venture business sales opportunities in addition to consumer sales.

Technological

1. Increase in embedded technologies driving safety and performance and implementation of green technologies: Passenger vehicle ownership has become one of the most sought after thing for the people. More sophisticated systems and features are being preferred by the consumers. This calls for increased level of semi-conductor utilisation – telematics, on-board infotainment systems etc. thus improving the consumer experience. Technologies are preferred to be smarter and so are the passenger vehicles which call for assisted driving and other automations which reduces human interventions. Semi-conductor technology has coupled with developing lighter weight materials for manufacturing for better speed, improved aerodynamics for better fuel efficiency and ergonomics, power train revolution calling for development of hybrid and electric power train for cutting exhaust pollution.

Legal

1. Greater attention and more initiatives to reduce environmental impact due to automobiles: Various national governments are focussing on reducing environmental impact owing to the vehicle emissions. Europe is set to follow stage 6 emission standards to reduce CO2 emissions and implement on road emission tests. Emerging countries are even trying to match the most recent advancements in regulations prevalent in US and Europe. BS 3 vehicles sale has been banned in India with effect from April 1,2017 which has led to mandatory switch to BS4 technologies for the automobile OEMs in India. China is to follow European stage 6 emission standards and US standards pertaining to evaporative emissions and on-board diagnostic requirements. California air research board has adopted LEV III rules taking effect from 2015 which led to regulating tailpipe & emission standards in the country.

2. More legal compliance measures to increase passenger safety: Safety features like ABS, lane departure warning systems, electronic stability control and automatic brake assistance. Additionally, in Latin America and Caribbean countries, there are additional safety requirements laid down by NEW CAR ASSESSMENT PROGRAMME calling more sophisticated safety features, information to consumers and improved crash tests of the vehicles.

Environmental

1. Growing criticism towards environmental pollution created by vehicles: Due to growing adverse impact on environment due to various reasons, there has been a drive by almost all countries to reduce carbon footprint of the products and processes. Improved combustion technologies to reduce unburnt fuel amount being emitted, better exhaust treatment processes – implementation of BS4 and Euro6 standards worldwide are most likely to gain ground in recent days. Also, power train technology has also to advance which is getting shifted from gas/oil fired to electric power driven drawn from batteries or solar cells. It has added to the woes of the automobile companies in the perspective of modifications in manufacturing processes as well as raw material sourcing and vendor development capabilities.

To get the complete detailed PESTLE report on Maruti Suzuki please mail us at: support@swotandpestle.com. or contact us here.

Maruti Suzuki PESTLE analysis has been conducted and reviewed by senior analysts from Barakaat Consulting.

References

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