With a ‘Work hard party harder’ philosophy in mind, many companies go by the philosophy of sweating it out in the Indian market to launch the right set of offerings for the consumer. And if it delivers the desired results, the celebrations that follow are often grander and much more long lasting. However, Maruti Suzuki doesn’t seem to be leaving anything to chance ever since it saw its market share erode from highs of around 90%. Even after staying ahead of the curve in the premium hatchback segment by launching the Swift in 2005, its market research team was again out in the market asking consumers about how they could do better. Rather than organising gala celebrations boasting of its strong hold in the segment, Maruti Suzuki focused on making the product more sporty and stylish. Even as it became the fastest car model to reach the 3-lakh milestone in a period of just three years and eight months in February 2009, the market leader came up with the new generation Swift in August 2011. “The motive was to understand what the modern consumer was missing in the Swift and with the second generation of the product, we included all possible changes to make it more appealing to the TG,” says Shashank Srivastava, Chief General Manager – Marketing, Maruti Suzuki.
While many experts argued that there was no need to launch a new-generation Swift as the earlier model was still a category leader with a waiting period running in months, the company had different plans. Perhaps the rising competition in the small car segment forced Maruti Suzuki to go back to the drawing board and look at the bigger picture.
A lot has changed for the market leader over the past few years. Till early last year, Maruti Suzuki always boasted of 50%+ market share but rising labour problems and aggressive launches by the competition have put the company on the backfoot. As per a report from Prabhudas Liladhar, Maruti Suzuki will file an 11% decline in overall volumes for FY 2011-12 standing at 1.1 million units but will bounce back with a 14.8% growth by the end of FY 2012-13 to sell 1.3 million units. Car sales for the company in October were 55,595 units, down by around 53.2% yoy, thanks to the strike.
Needless to add, India has always been a small car market and is expected to tread the same path even in times to come. As per estimates from J.D. Power, India is expected to become the third largest automobile market by 2020 with light vehicle sales expected to touch 11 million units. From the late 1990s where the consumer only had options like Maruti 800, Zen, Santro and Matiz to choose from, the small car segment offers 26 options today in terms of models.
Undeniably, as the Indian market has grown in volumes, Maruti has expanded its portfolio to seven hatchbacks and continued its dream run on the perch. But the competition has been eying the huge pie that the market leader holds for long now. Going by the trend in the west, the market leader in the automotive segment holds 20-25% market share on an average. For instance, in the US, the market leader (General Motors) holds 20% market share. “In a scenario where competition is rising by the day, new entrants will corner market share from the biggies like Maruti Suzuki. That has been the way it has happened globally and India is no exception,” said an automobile veteran on conditions of anonymity. From a market share of 52.16% in 2008-09, 50.13% in 2009-10 and 48.74% in 2010-11 in the passenger car segment, Maruti’s market share has come down to 41.23% in FY 2011-12 (April-October). However, the alarming fact is that most of this market share has come from the small car segment, which has been its bread-and-butter for decades. For the uninitiated, Maruti Suzuki held a dominating 56.11% market share in the small car segment at the end of 2009-10, which fell marginally to 55.78% at the end 2010-11. Today, it stands at 45.9% for FY 2011-12. Clearly, competition is gaining, and they are looking to take share from the leader.
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Source : IIPM Editorial, 2011.
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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