the indian Automotive sector as a whole faced tremendous slowdown in demand but market leader Maruti Suzuki posted mind-boggling numbers. B&E Pawan chabra finds out what the company did differently in the last fiscal to achieve this feat
“In times of a slowdown, people do not prefer to take any risk. They prefer purchasing brands on which they have full trust, and in the automotive market, Maruti Suzuki comes on top on these grounds.” This is what Shinzo Nakanishi, Managing Director, Maruti Suzuki India had to say when asked how the company was able to post stupendous growth in the last fiscal and that too at a time when other auto companies were bleeding.
There is no denying that the Indian automotive industry has seen a slowdown in demand in the last fiscal, but the big daddy Maruti Suzuki, which sells every other car being sold in the country took everyone else by surprise by posting a mind-boggling revenue figure of Rs.20.85 billion for FY09, registering an increase of 16% in the bargain. Despite a 30% dip, Suzuki also posted a cool Rs.12.2 billion net profit, way better than its counterparts.
Maruti Suzuki was quick to identify the effects of slowdown in urban India. “We saw the slowdown hitting urban demand much before others did. So we immediately decided to expand our presence in the rural areas,” avers Nakanishi. The company’s expansion into the rural and the semi-urban areas helped the company to steer successfully from the slowdown blues. “The company bagged a 9% contribution from sales in the rural areas for FY09, which used to be around 3.5-4% till last year,” says Nakanishi. In fact, the decision also made a lot of strategic sense when estimates show that only 19 out of 1,000 people in rural areas own a personal mode of transportation, which leaves very little space for wondering why experts do not label rural areas with very high potential. Maruti Suzuki surely cashed in on this opportunity, but what does the company plan to do going forward with its rural dream?
“In times of a slowdown, people do not prefer to take any risk. They prefer purchasing brands on which they have full trust, and in the automotive market, Maruti Suzuki comes on top on these grounds.” This is what Shinzo Nakanishi, Managing Director, Maruti Suzuki India had to say when asked how the company was able to post stupendous growth in the last fiscal and that too at a time when other auto companies were bleeding.
There is no denying that the Indian automotive industry has seen a slowdown in demand in the last fiscal, but the big daddy Maruti Suzuki, which sells every other car being sold in the country took everyone else by surprise by posting a mind-boggling revenue figure of Rs.20.85 billion for FY09, registering an increase of 16% in the bargain. Despite a 30% dip, Suzuki also posted a cool Rs.12.2 billion net profit, way better than its counterparts.
Maruti Suzuki was quick to identify the effects of slowdown in urban India. “We saw the slowdown hitting urban demand much before others did. So we immediately decided to expand our presence in the rural areas,” avers Nakanishi. The company’s expansion into the rural and the semi-urban areas helped the company to steer successfully from the slowdown blues. “The company bagged a 9% contribution from sales in the rural areas for FY09, which used to be around 3.5-4% till last year,” says Nakanishi. In fact, the decision also made a lot of strategic sense when estimates show that only 19 out of 1,000 people in rural areas own a personal mode of transportation, which leaves very little space for wondering why experts do not label rural areas with very high potential. Maruti Suzuki surely cashed in on this opportunity, but what does the company plan to do going forward with its rural dream?
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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