Maruti Suzuki Case Study

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Table of Contents

1        Introduction        

2        Background of the motor industry of India        

3        Strategic Planning        

3.1        PESTLE Analysis        

3.1.1        Political Factors        

3.1.2        Economic forces        

3.1.3        Sociocultural factors        

3.1.4        Technological factors        

3.2        SWOT Analysis        

3.2.1        Strengths        

3.2.2        Weaknesses        

3.2.3        Opportunities        

3.2.4        Threats        

4        Attractiveness of the Industry        

4.1        Competitors in the industry environment.        

4.1.1        Threat of new entrants        

4.1.2        Threat of substitute providers        

4.1.3        Intensity of Rivalry        

4.1.4        The bargaining power of suppliers        

4.1.5        Customers / Power of buyers        

5        Conclusion        

6        Bibliography        

1. Introduction

There are various external forces that can affect different industry environments. This can present opportunities and threats for companies operating in the same industry. Companies need to adapt to an ever changing environment by changing their strategies with the constant change in the environment. This will allow companies to sustain a competitive advantage (Hill and Jones; 2004). According to Peet Venter (2015) there are many external factors and forces that affect industries and organisations such as, customers, suppliers, existing competitors, potential competitors and substitute providers. Porter (2015, Peet Venter; 148) states that the primary entrants of an industry are customers and suppliers. These include incumbent rivals, new competitors and providers of new products and services from outside industries. An industry Analysis is of extreme importance for an organisation when making strategic decisions in order to sustain a competitive advantage.

This assignment focuses on the “industry analysis in the context of external environment” and “the attractiveness of the industry”, with reference to Maruti Suzuki in the conclusion.

1. Background of the motor industry of India

The automotive market is one of the foundations industries of the Indian economy. The Indian government made a decision in the early 1980s to produce a small car which would focus on the middle class. With Japans advanced technology and their world class capabilities in small car segments gave Suzuki the opportunity to form a joint venture with the government owned company Maruti Udyog. The Indian government made an economic transformation in the 1991 by de-licensing their section of the automotive industry which opened up a 100% Foreign Direct Investment. International names like Ford, Hyundai, Toyota, Volvo, Daimler Chrysler and GM Honda were able to venture into the Indian automobile sector.

1. Strategic Planning

According to T Brevis and M Vrbra (2014) the internal and external environment should be analysed in order to identify strengths, weaknesses, opportunities and threats that can have an impact on any organisations survival. Strategic planning involves various analytical tools to accomplish the desired organisational results. These tools include PESTLE and the SWOT Analysis.

1.  PESTLE Analysis

The PESTLE analysis includes the following important factors:

1.  Political Factors

This factor looks at how government regulations and legal issues affect a company’s ability to be profitable and successful. Issues that must be considered include tax guidelines, trade regulations, social and environmental policy, employment laws and safety regulations. According to Peet Venter (2015) no organisation is exempt from government legislation and regulations. Various government interventions in the form of policies have influenced the development of India’s automotive industry. Some of these policies relates to the imports and exports of the automotive industries trading in India. Government should play a direct role by providing capital, subsidies or protecting the investments and create factors such as infrastructure.

1.  Economic forces

Economic forces refer mostly to the macroeconomics factors as these factors have a high impact on the business environment and an organisation has no control over them. It is very important for an organisation to modify its strategies to make the most of the economic situation at present. Unisa Study Guide (2016) points out that the following four economic factors are important from a business perspective:

1. The growth rate of the economy:

A growth rate in the economy such as an increase in the annual GDP will result in the countries businesses making profits as consumer will have more disposable income. If there is low economic or no economic growth there could be a recession and profitability will stagnate.