Business Case Studies,Corporate Governance & Business Ethics Case Study, Maruti Suzuki India's Foray into Africa

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Maruti Suzuki India's Foray into Africa



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Code : COS0109

Year :
2013

Industry : Automobile

Region : India, Africa and Europe

Teaching Note: Available

Structured Assignment : Not Available

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From Maruti Udyog to Maruti Suzuki India LimitedThe company was initially started by the Government of India under the name Maruti Technical Services Private Limited. It entered into collaboration with Suzuki Motor Corporation (Suzuki) of Japan and was rechristened Maruti Udyog Ltd (Maruti) in 1982. As per the agreement, Suzuki transferred the technology of its three latest car models, owned a 26% equity stake in Maruti with the assurance that it would increase this to 40%, built a car in India with parts sourced locally, and promised to increase the domestic parts to 95% by 1989. Though the government initiated dialogues with Nissan, Mitsubishi, and Daihatsu apart from Suzuki, none of these companies was ready to comply with the terms of the equity partnership. The Maruti-Suzuki deal was a part of the governmentís initiatives to encourage foreign collaborations in the industry...

Maruti Exports to Europe Marutiís parent company, Suzuki Motor Corporation, was a well-known name in the global market in the mini and compact cars segment from the 1980s. Suzuki created a niche for itself in the international markets by offering power and performance with a compact, lightweight engine. Its engines were also known for their lower pollution levels and fuel efficiency...

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From Europe to Africa Maruti realigned its export destinations following the withdrawal of the scrappage schemes and GSP benefits in Europe in 2010. The company focused on Africa to replace Europe as its biggest export destination. Countries like Mozambique, Nigeria, Egypt, Algeria, South Africa, and Angola were the biggest importers of Maruti vehicles. By the end of fiscal 2011-12, Algeria became the only country to import over 100,000 units from Maruti. It imported 17,247 vehicles from Maruti in 2011-12 to become the companyís largest export market, ahead of Sri Lanka (15,359 units) and Indonesia (10,551)...

Way Forward By 2013, Maruti was contemplating setting up its first overseas assembly plant in Africa. The company had a target of doubling exports over a period of four years and it felt that the African nations that were beginning to be motorized would be the key to realize this aim. Local assembly plants would help the companies in lowering taxes and duties, which would ultimately lead to the vehicles being priced lower. As governments did not allow imports after reaching a certain limit, Maruti was of the opinion that local assembly plants would help circumvent the problem. Above all, the idea of setting up an assembly plant reflected Marutiís confidence in its sales in African countries...







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