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The cumulative impact of all these keen strategies reflect directly on Maruti Suzuki’s financial results for the last fiscal. They took everyone by surprise when they posted mind-boggling revenues of Rs.20,852.52 crore for the year ending March 2009, registering a 16% increase as compared to last fiscal. Despite a 30% dip, Suzuki also posted a cool Rs.1218.74 crore as net profit, way better than its counterparts. In absolute sales too, at 3.6% the company sold lesser than expected, but analysts believe the growth to be decent keeping in mind the hit that the sector has taken in recent times. Industry watchers go so far as to claim that parent company Suzuki Motor Corporation, Japan has been able to avoid losses for the Jan-Mar 2009 quarter simply on the back of the boost given by India’s sales figures.
Given the praise and glory that is coming the way of Maruti Suzuki and the strategies it adopted to deal with falling demand, it was inadvertent perhaps that the company would continue to enhance its focus on these same strategies in at least the near term. And here’s how the company is planning to further cash in on the rural opportunity. For starters, the sheer number of RDSEs are going to go up and so are the number of outlets in rural areas. Says Shashank Srivastava, Chief General Manager (Marketing), Maruti Suzuki India, “We will be hiring in the rural areas very aggressively this fiscal,” adding that the company is hoping to lift the rural contribution to total revenues (from the present 9%) to 15% by the end of this fiscal. Of course, requirements in the rural and semi-urban areas are very different from that of the urban market and the company is expecting higher sales for its entry level vehicles in these markets. The bid is clearly to play the volumes game rather than spruce up margins and profitability by offering high end products like a Vitara or a SX4 in these markets. “We are open to meet any demand that comes from rural areas,” points out Srivastava. As any true blue marketer would, he is betting on upping the marketing blitz at the time of crop harvest or when “the farmers have money to purchase a new vehicle,” he explains.
Perhaps Maruti Suzuki’s unexpected announcement of not phasing out the popular 800 is a well-thought out decision to cater to the rural and semi-urban markets. Auto expert Tutu Dhawan explains, “They’ll probably remove the 800 from urban centres and sell the entry-level model in rural areas only where its demand will be high.”
There’s more cooking! The new-found potential that they have discovered in the hinterlands is prompting the marketing brains at Maruti Suzuki to double their number of outlets in rural India. As of now, rural India has 231 outlets out of its total 680 outlets - a 35% share. Two years hence, the company intends to jack the number up to 450 outlets in rural India, out of the planned total of 1000 outlets - an almost 50% representation. If that is not indicative of Maruti Suzuki’s rural ambitions, what is? The expansion is largely being led by offering small rural dealerships to existing urban dealers and hiring the educated local residents, so that an easy connect can be made with the target segment. Going forward, experts believe that other auto players – Hyundai, Tata Motors – are also likely to enter the rural markets very aggressively. But once again, Maruti seems to have captured the first mover advantage!
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Source : IIPM Editorial, 2009
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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