CASE 12
The Call of the Competition
Competition is a necessary evil in marketing.
Maruti Suzuki (hereafter referred as Maruti or Suzuki interchangeably) has been a long-reigning monarch of small cars in India. It’s been more than three decades when India’s first Maruti 800 was launched as a modern personal transport, a sense of pride for Indians. Since then, the brand has evolved, adapted and updated itself to changing scenarios, and have had an amazing transformational journey.
With South Asia witnessing rising economic levels, came in shifts in consumer choices. To fit itself aptly into the changed milieu and aspirations of these economies, Maruti has stepped past compact cars and today carries within its stable, models for different upscale segments.
Maruti, for long, established its strong leadership credential in the entry-level segment. From time to time, Maruti Suzuki has faced competition from various players latest being Renault Kwid —posing a major challenge, resulting in market share of Maruti Suzuki dropping from 48 to 40 % in the entry car segment in 2016. The new entrant Kwid took away 20 percent of the segment sales and managed to sell an average of 8,812 units per month.
It is often said, ‘When going gets tough, the tough gets going’. Mr. Devendra Chawla, president (Food & FMCG brands), Future Group, once very well summed up about leader brands during such tough conditions by saying, “At such times, market leaders enter newer sub-segments and invest aggressively to defend their turf, which in turn helps in gaining share from fringe players. Also, since a majority of new launches fail in the country, market leader tends to benefit after the challenger brands concede.” Invariably, competition leads to increase in market size and leader may end up with stronger position as challenger vacate space.
BRAND EQUITY FORTIFIES THE POSITION
Maruti Suzuki decided to play its defensive strategy, mainly by protecting its turf on two fronts—one at the entry-level and the other as nation’s largest car maker. To take care of the former, Maruti is all set to develop a new-generation Alto, which will be launched by the festive season of 2019 and will strengthen its hold in the entry-car space. The new car is expected to be expressive with great design & crossover look. For the latter, Maruti is making strong headway in the B segment comprising of cars at the premium end of the market—the Baleno, Vitara Brezza, and Ciaz priced between ₹5 lakh and ₹12 lakh. VG Ramakrishnan, managing partner at consultancy firm Avanteum Advisors LLP, strongly credits new product launches for continued strong performance of Maruti Suzuki.
Serious attempts by Maruti to reinvent itself through a surge of upscale launches have helped the company stay ahead and retain the crown of being the country’s largest car maker. Overall, the company is sitting on a decade high market share of close to 50% and plans to launch 15 new products by 2020. The company’s market share was 45.9% a year earlier, while its all-time high was 52%, as recorded in November 2016.
The table below clearly shows that eight of the country’s top 10 models are from Maruti Suzuki’s product portfolio which itself stands testimony to their market share during the month.
Maruti has all its strategies well-crafted and properly laid to enable it to continue on the winning spree with double digit growth rate. In the first 11 months of fiscal 2017, it sold 13.1 lakh vehicles in the domestic market, a nearly 11% increase from a year earlier. Its announcement to the component vendors to be ready with supplies for production of 17.25 lakh to 17.30 lakh vehicles in fiscal 2018 starting April, talks about its ambitious future plans.
Along with product innovation, focus on consumer preferences and service network, another important factor that contributed to volume gain for Maruti is wide distribution and its continual efforts to expand it further. It is adding about 250 dealerships, including 50 Nexa outlets that sell premium products over next 2 years.
VG Ramakrishnan, managing partner at consultancy firm Avanteum Advisors LLP, says, “The Company has always got right its product positioning and pricing. They have a phenomenal brand appeal. There is nobody who can beat them in the near future.” But he also adds a word of caution for the leader to be prepared to face the new intensity in competition once Korean Kia and Japanese Daihatsu enter the Indian market.
WITH COMPETITION EVOLVES THE MARKET
With every new competition, Maruti has only raised the bar of competitiveness. Sometimes, nothing succeeds for market leaders like a little competition. As was once very well put in related to leader brands by Mr. Prashant Peres, marketing director for chocolates at Mondelez India, “When competition intensifies, you either gain share from some of the existing players or grow in a way you create head winds in some segments which outgrow the market.”
Maruti Suzuki has, with elan, moved beyond its bailiwick. Company which was largely identified as the maker of no-frills, 796-cc passenger vehicles meant for culturally unsophisticated towns, today has under its umbrella the sedans, crossovers, SUVs, vans along with of course its mini cars and premium hatchbacks. It was successful in identifying most of the potential holding flanks and filled them all with products which are gaining edge over well-entrenched, fancied rivals and global players all around the market place. Table below reflects the dominance of Maruti Suzuki for the year ended March 2017.
The company is also exploring the possibility of introducing a mild-hybrid in the petrol engine which may take the Maruti’s famed high-fuel efficiency to the next level. Maruti’s expansion covering all gaps in the market has not weakened its traditional stronghold or diluted its image. In the mini-car space, Alto has a strong lead of more than one lakh cars over its nearest rival Renault Kwid in FY17. The premium hatchback Swift was ahead of Hyundai Grand by about 20,000 units in FY17.
Interestingly, despite being as foreign as most of its’ competitors, Maruti Suzuki has still managed to retain its’ image of “Indianness” and continues to play the card very well.
Are there any flanks which this smart-savvy brand Maruti has left untapped? Hyundai Creta and Toyota Innova are the two leaders in segments where Maruti’s presence is not visible at all. The brand has travelled a long road and it has still miles to go and explore new unchartered territories to stay vibrant and alive.
MONARCH’S CLEVER MOVES
Mobile is the only mantra for marketer’s success and sustainability. Markets are moving targets and so nothing is constant in marketing. Maruti Suzuki—inspite of the immense love and loyalty showered on it by its customers—could not achieve success when it tried to foray into premium car segment through launches like Kizashi and Vitara. A brand known for its great value, fuel efficiency and huge service network could not fit into the image of a high-end brand. Maruti Suzuki in order to defend its position of being the largest car maker of the country could not afford to leave this wide flank open and uncovered. Complete image makeover was required and in order to defend its leadership status Maruti had to take a revolutionary move. Market broadening and diversification by the brand was the strategic route chosen to keep the challengers at bay.
Not only Maruti Suzuki planned to enter some of the these segments where it was not present but also creation of NEXA led to it creating a new category of affordable premium segments and drive higher profitability. The creation of NEXA was fresh & bold attempt to enter the high-end car segment and is first of its kind premium retail network. The big objective was to cater to the high-end consumers who have gone beyond their first cars and are now looking for an experience. S Cross was the first car launched at Nexa and was quickly followed by Baleno hatchback. Maruti Suzuki launched Ignis through this premium retail in Feb 2017 and has also moved sedan Ciaz to this category. To maintain exclusivity, it was decided that the cars sold from Nexa will not be sold at the popular Maruti dealerships.
STAY AHEAD ON THE CURVE
To understand the automobile market of India and prevailing competition, one brand which deserves a definite mention is Mahindra & Mahindra (M&M)—a brand strongly linked to the SUV segment. The new category of Sports Utility Vehicle (SUV) got created with the launch of Tata Safari in 1998 and got evolved with the launch of Mahindra Scorpio in 2002. The first movers, the stalwarts of this new category ruled undisputedly for many years. Mahindra & Mahindra stated that the company has sold 5 lakh units of Mahindra Scorpio in the SUV segment in India (till 2015).
M&M, which has long been the unchallenged king of the SUV market is now facing heat, due to competition getting intense in the space with rivals Maruti Suzuki and Tata Motors launching new models. In the 4-month period, April–July 2016, as per SIAM data, Maruti has seen its UV sales go up and its market share jumped from 13% to 24%. M&M also saw a jump in sales but only a slight and its market share shrank from 36% to 30%.
“Competition is heating up but we also have a slew of products in the compact SUV space at different price points which gives us better penetration both in cities and rural sectors. Our petrol KUV 100 is a new segment making it possible for the customer to buy an SUV as the first car,” said Pravin Shah, president & chief executive (automotive), Mahindra & Mahindra.
M&M is all geared up to face the existing competition and has planned several new launches and is ready to surprise market and competition, upgrading what lies within the fold. It is working very strongly on its strategies to safeguard its brand in the space where it holds power.
In the premium SUV space ranging from ₹15–25 lakh, M&M already enjoys leadership selling 3,000–3,500 XUVs a month, more than all models of other companies put together. It is in the micro-SUV space, where the company is facing maximum heat. Its market share dropped to 29% in the April–December 2016, from 36% in the same period last fiscal year. At the same time, challengers in the segment, Maruti Suzuki and Hyundai both registered strong double-digit growth in SUVs. In order to contain the slide in the micro-SUV segment, M&M is taking host of measures to defend its arena pre-emptively, by attacking before enemy starts its offence.
Firstly on the product front, M&M has focused on bringing out new variants of the XUV 500 and KUV 100. Upgradations in KUV are by improving the aesthetics, fuel economy, and features with no major price increase. Maruti’s success is attributed to the strong demand created by Vitara Brezza. And now new entrants Ignis from Maruti and Tata Hexa are seen as posing fresh threat for which M&M has to show its timely preparedness, to save itself from being dethroned. The new KUV variant will come with dual colours for the first time to keep itself competitive against the Maruti Ignis. The KUV will also offer the options of bigger alloy wheels and a host of accessories.
M&M is weaving its winning story around digital technology which is being highly embraced in today’s world. It is adding a host of connectivity technologies to make the XUV more feature-packed. It is also experimenting with some of the high-impacting technologies which will revolutionize the segment like the new Eco-Sense telematics feature which will allow real-time tracking of the vehicle, including fuel economy and wear and tear of parts. Mood lighting is another addition on offer.
A new feature of a safety button is being added in the XUV, which will be triggered in the event of any accident and call the stored emergency contact number. It will offer this feature to existing XUV owners as well through a small software upgrade.
To stay ahead of the curve and be relevant, M&M has identified the right gap in the need market. It is the increasing traffic on the road due to which people spend more time in cars and leaves them fatigued. Its connected features and various options offered will add relief by making them gainfully occupied while on road. Mahindra has already tied up with Google and has integrated the Android Auto operating system on the infotainment system of the XUV and is in discussion with Apple to integrate the Apple CarPlay.
Constant reinvention defines the rule of the winning game. Brands have to constantly push their competencies to a level where it becomes difficult for other competitors to reach and emulate. The pie is big enough and the brands can carve out their favourable niche by evolving the category and taking bigger share from it.
QUESTIONS
- An effective marketing strategy calls for maintaining a good balance of consumer and competitor monitoring. Highlight on the basis of the case as to how different brands have been successful in maintaining this balance?
- Leader brand Maruti Suzuki in order to remain dominant is making efforts to expand total market demand, protect its current market share and also to increase its market share. Explain the various steps and strategies adopted by Maruti to achieve the above.
- Enumerate on the various challenges being faced by Mahindra & Mahindra, a brand known for SUVs. What strategies should it lay down to fight emerging competition in the SUV segment?
- As a consultant engaged by Maruti Suzuki, scan the competition for the company. Also identify opportunities and customers, both current and potential for the right strategy build-up of the company.