Monday, March 18, 2013

Can it Manage a Repeat this Year?

Maruti’s Adoption of a New Three-Pronged Strategy fuelled its Topline Growth in FY2009-10. Can it Manage a Repeat this Year?

Talking about his rural drive, Mayank Pareek, Head of Marketing at Maruti, tells B&E, “The rural fairs that we conducted helped attract many new buyers in unexplored markets. They are the lot which prefers a 100% down-payment mode of transaction than visiting dealerships.” By the end of FY2009-10, Maruti had increased its contribution to topline from rural markets to 18% from under 2% a year ago, and had appointed 4,000 Rural Resident Dealer Sales Executives. But this is not to say that the company diverted focus away from metropolitan locations. “We also increased our marketing drives in the Tier I locations, where our offerings did enough to entice consumers, who were excited about purchases post-a-slowdown.”

So what do we expect from the market leader this financial year? It has been much criticised with Maruti registering a 7.80% y-o-y fall in half-year profits (during H1, FY2010-11, primarily due to rising royalty to Suzuki Japan). Despite this, the 22.77% y-o-y growth in unit sales (441,948 units) during H1, FY2010-11 and the 26.14% appreciation in topline (touching Rs.176.88 billion) during a “criticised” six month period, should make all at Maruti proud. There are challenges, yes. It comes in the form of rising competition, with new manufacturers entering the small car market. But as auto expert Tutu Dhawan tells B&E, “Maruti has no threat to its leadership position in the near-term...”

Even if the carmaker maintains the current rate of topline growth, which is extremely unlikely considering that Q3 & Q4 are always the best for any carmaker, it will end FY2010-11, with a turnover of Rs.373.66 – a y-o-y increase of Rs.82.68 billion. Enough chance of making it to the next year’s edition of B&E’s India’s Fastest Growing Companies rankings.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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