Suzuki Motor SWOT and PESTLE Analysis

Strength

1. Consistent Financial Performance: The Company has shown a consistent performance over the years, with stability in Cost of goods sold as a percentage of sales and net profit margin. The return on equity has increased to 14%, due to the increase in leverage ratio from 1.93 to 2.25, over the years. The company has been able to decrease its cash conversion cycle over the years from 414 to 340 days, which is a positive sign. Also, over the years cash asset has increased substantially. Most of its current assets is in form of cash and liquid securities. The receivables and payables have remain constant over the years. The revenue growth for the company has been around 4.22% CAGR and profit growth has been around 15% CAGR.

2. Stronger Partner: The recent cross – branding deal between the two companies will open up opportunities for Suzuki Motor Corporation. SMC will receive research and development support as well, apart from branding. This will help SMC in pushing the premium segment automobiles in various markets around the world, it operates in. SMC will get support in developing the hybrid and electric car segment from the industry leader. The deal with Volkswagen went sour because of ownership issues and lacking of appropriate access to the technology for SMC from VW, but with Toyota, the deal seems synergetic because the cultural fit and requisite empathy. Recently, a trend of Japanese entities teaming up is also observed.

3. Research & Development and Testing Centres: SMC continually tries to develop "value-packed products", adapting to the demands of the new generation, developing novel technologies and implementing them to create better mix of product portfolio. Yokohama R&D centre, Marine technical centre and Motorcycle technical centre stand as the backbone of the R&D of the company, providing requisite impetus in the domains of energy, electronics, environmental applications, and information and computer applications. Lately, SMC has also ramped up R&D spending to defend its market share in India. The company is planning to spend 160 billion Yen for R&D in year 2018, which is about 13% increase in R&D spending as compared to last year.

4. Leadership position of Maruti Suzuki in India: The partnership with Maruti has proved to be a great boon for the company in India. Together they capture around 47.4% of the four wheeler market share in India. Indian auto industry is fourth largest in the world with sales increasing at a rate of 9.5% annually for 2017, excluding the two – wheelers segment. India serves as an important market as well as a country of abundant resources like skilled labour, steel at a lower cost. It has the largest dealer network (2020 outlets in 1652 cities) augmented by its 3305 service centres in 1570 cities. Also Indian production caters to the export requirements of various countries like Sri Lanka, Chile, Philippines, Peru, etc. Apart from that, the company maintains a varied product line catering to different segments of the society.

Weakness

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Opportunity

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Threat

1. Increasing competition in automobile segment: The industry that Suzuki Motor Corporation operates in is very competitive, as there are large number of players operating, with production capacity very low as compared to industry leaders. E.g. Isuzu, another Japanese automaker having 0.65% production to total global production. So, there is always a possibility of consolidation in the industry. Even partnerships between Suzuki and Volkswagen did not work out as only possible ultimate option was a takeover of Suzuki by the later. Also, industry leaders generally become the trend setters in various domains, as they put in more capital into Research & Development, for futuristic technology.

2. Smuggling of Automotive Parts: Counterfeit parts have plagued the automobile industry, always. It costs brands there image, customers their life, sometimes. The estimated cost borne by the companies due to the fake parts is around $45 billion, globally. These counterfeit products are sold using online marketplace using the images of original equipment. According to Automotive Aftermarket Supplier’s Association (AASA), US also faces a major challenge from the counterfeiters, losing $3 billion annually.

3. Demand for Public Transport: A trend pertaining to greater use of public transport is seen, globally. China, the most populous emerging economy in the world, has seen a second largest growth in public transport usage. Moreover, urban dwellers demand the public transport for travelling. E.g. In Canada, 70% of the total public transport ridership comes from three largest metropolitan cities. Similar trend is also seen in European Countries. Also, the governmental initiatives of transit – oriented – development of urban areas will lead to efficient public transport infrastructure. So, demand growth for public transport will lead to investments in creating infrastructure for the same and affecting the market of automobile makers.

Political

1. Varied Business Environment from country to country: Government plays a major role in the implementation of regulations pertaining to automotive industry, which is very sensitive to policy changes. Environment and Safety of the customers are the main concerns, where governmental regulations are framed. Without adequate procedural implementation, the automakers are subject to hefty fines. Emission laws put forth by government also tends to affect the bottom line of the company. The Suzuki Motor America Inc. entered into an administrative settlement with US Environmental Protection Agency over Clean Air Act violation, which cost the company about $2 million, apart from getting bound with other non – penalty impositions. In India, structural changes in taxation by implementation of various reforms and laws, like GST will definitely affect SMC in a favourable way.

2. Risks arising from geo-political uncertainty: The uncertainty brings in the risk of an adverse impact on the business. “Policy stability and predictability are important to nurture the industry ecosystem. It helps industry gain efficiencies and get clarity on which targets and technologies to work on”, quoting Maruti Suzuki India MD and CEO Kenichi Ayukawa. Brexit will have a significant impact on the pricing of Suzuki’s product in UK because of the significant uncertainty created. Suzuki has a manufacturing facility in the state of Hungary. The estimated hit to be taken by the company amounted to 65 billion Yen.

Economical

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Social

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Technological

1. Industrial Automation:Most advanced automation technology used in Automobile industry are as follows: a) Machine Vision, b) Collaborative Robots, c) Autonomous Cars, d) Cognitive computing in Internet of Things connected cars. These innovations have altered the procedure how the manufacturing was done before. Also, these have added a substantial value to the offering. Smart manufacturing has become the buzz words. All these manufacturing paradigms augmented by the Kaizen and Just – In – Time paradigms, have improved the efficiency of manufacturers. Suzuki has robots put in the shop floors. It has a partnership with a Japanese company Fanuc Robotics that provide the company with robots of required specifications.

2. R&D and Technological Collaboration: It is also working towards the development of electric cars; recently an electric concept car, with autonomous driving capacity was showcased at a car expo. JV with Toyota will help Suzuki to develop required electric vehicle manufacturing capabilities. They will collaborate on advanced driver systems and autonomous vehicles technologies, emphasising as well on the green technologies and other information technology aspects. Apart from that Maruti Suzuki is partnering with local tech firms as well in India for future product developments.

Legal

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Environmental

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