AfterIndiaopened upitseconomy intheearly 1990s,theIndianautomobile industry witnessed intense competition.MarutiSuzukiIndiaLimited(Maruti)hadbeenadominantplayer in theIndianautomobile industry sinceitbeganoperations in1981.MarutiwassopopularthatinIndiapeoplehadlong usedthe word"Maruti"asasynonym for"car."Marutihadexperiencedadream runforthreedecades, achieving thelargestmarketshareinthepassengercarindustryinIndia.Butforthefirsttimeafter28yearsof consistentgrowth,Marutiexperienceda fallinsalesvolumein2012(seeExhibit1).Evenin2014, after twoyears, ithadnotyet recovered.R.C.Bhargava,thechairmanofMaruti,wasconcernedwithhow to turn thingsaround.HeknewthatMarutihadlittlecontroloverpricing,giventhe fiercecompetitionin the sector.Despitethepriceofcarsremaining stagnantoverthelastdecade,Marutianditscompetitorswere experiencingdecliningsales.2Pricesoffuelhadadverselyaffected demand.Inputcosts formanufacturing wereincreasingyearafteryear.Withsuchadismaloutlookfortheautomobileindustryandwithpoor pricemaneuverability,howlongcouldMarutisustainprofits? Thechairmanknewhehadtodecrease the costsofmanufacturingandhewasconsideringbuildingastate-of-the-artplantinGujarat.3 Wouldthis reducecostsenough tohelpMarutibecomemoreprofitable?

INDIANPASSENGERCARMARKET

TheIndianpassengercarmarketwasthefastestgrowinginAsia,drivenbyIndia'slargepopulationof

1.28billionandalowpenetrationoffewerthan12carsper1,000people(seeExhibit2).Priortothe1990s,theIndianautomobilesectorwasinpoorshapecomparedtotheautomobilesectorsinother

countries,largelybecauseofdemand-sideconstraintssuchasthelowpurchasingpoweroftheaverage

Indianconsumer.Before India'seconomic liberalization, themajority ofIndia'spopulation couldnot afford tobuy acar,and carpenetrationwasless than threeper1,000 people.Afterliberalization,with risingincomelevelsofmiddle-classfamilies,thedemandforpassengercarswentupsteadilyoverthe next20years.However,carpenetrationwasstillvery lowcompared to inBrazil,Russia,China and developedcountries(seeExhibit2).From asupply-sideperspective,theautomobileindustryhadgreatly benefitedfrom liberalization,asinternationalautomobilemanufacturerstookadvantageofIndia's affordableyethighlytrainedengineers,establishingmanufacturingoperationsthroughoutthecountry. DuetoIndia'shugepooloftalentandrising incomelevels,India'spassengercarmarkethadgrownin termsofproduction and salesand wasexpectedto growfurtherincoming years.4

PassengervehiclesinIndiacouldbebroadlydividedintothreesegmentspassengercars,utility vehiclesandmulti-purposevehicleswithpassengercarscontributing around 80percentoftotalsales volumes.Asof2014,thissegmentwasexpected togrowatacompoundannualrateof15per centfor thenext15to20years.Apartfromdomesticgrowth,automobileexportsfromIndiawerepredictedtogrow at12percent.Itmaybenotedherethat,inalowpercapitaincomecountrylikeIndia,two-wheelers (motorcyclesand scooters)constituted amajormodeof transportation forthelowermiddleclass,who wouldeventually graduate tothesmall-carsegment.Inmostcitiesandtowns,duetothepoorquality of roadsandexcessivetrafficcongestion,motorcycleswere thefirstchoice fordailycommutes.However,a carwasconsideredaprized possessionforamiddle-classIndianfamily,eventhoughitwasnotusedona dailybasis.Withrisingincomelevels,thisheldgreatpromiseforcarmanufacturers,asfewerthan12 peopleper1,000ownedacarin India, reflectinghugemarketpotential.

MAJORCOMPETITORSOFMARUTI

ThereweremanyplayersinthepassengercarsegmentinIndia.Someoftheseplayersweredomestic, suchasMaruti, TataandMahindra.OtherssuchasHyundai,HondaandToyotawerefrom otherAsian countries. Thetwo companies withthelargestmarketsharein Indiawere Maruti,at49 percent,andHyundai,at21 percent (seeExhibit 3for trends in the marketshare ofMarutiand itscompetitors). AlthoughthereweremanyplayersintheluxurysegmentofthemarketsuchasMercedes-Benz,BMW andAudi,therewerefewbuyerswhohadtheincometosupportsuchpurchases. Therewereother competitorsforMarutisuchasFord,GM,Nissan,Renault,kodaandVolkswagenthatcompetedin mini- andmid-segmentcars. Thesecompanieshadtakenconsiderablemarketsharefrom Marutiinrecent years.

MARUTI:THECOMPANY

Establishedin1981,MarutienjoyedthelargestmarketshareintheIndianpassengercarsegment.In2014, Maruti, withtwo production facilitiesatGurgaon and Manesar(bothin theNationalCapitalRegion ofDelhi),had aproductioncapacityofmore than 1.4million unitsperyear.5Theproduction facilities had

morethan 12, 000 employees6and produced more than 16 automobile models,7eachwith multiplevariants.8ExamplesofMaruti'sproductofferingsincludedsmallcarsliketheMarutiAlto,WagonRand A-Star.Smallcarsmadeup41.2percent9 ofMaruti'stotalsalesunits.Inthecompactcarsegment, MarutiofferedcarssuchastheSwift,Estilo,Ritz andCelerio.This segmentmadeup24percentofMaruti'stotalsales.Inthemid-sizesegment,thecompanyofferedtheSX4andDzire,whichcontributed

19.1percentofsales. Thesportutilityvehiclesegmentmadeup just5.8percentofsalesandcontributed less to Maruti'sprofitsthansmallandmid-segmentcars.Finally,inthevanssegment,the company was knownfortheOmniand Eeco,whichcontributed9.6percenttoitsoverallsales. Theremainingsales camefrom othermodelsofMaruticars.From theMaruti800 in1983up to thelaunchoftheCelerio inFebruary 2014,Marutihad rolledoutmodelaftermodelandexceededcustomerexpectationsin termsof qualityand value formoney.

Maruti focusedonthreekey strategiestogeneratesales.Firstand foremost,itspricing strategy wasvery competitive.Forexample,inthesmallcarsegment,theMarutiAltowaspriced 10-20percent lower than competing modelssuch as theHyundaiSantro, TataIndicaandChevroletSpark (seeExhibit4).Second, Maruti spent a great deal on research and development to create more fuel-efficient engines. This decreasedthecostofowningacarforaconsumer;Indiancustomerswereverysensitive10regardingthe fuelefficiencyofvehicles,sincefuelcostswerehighrelativetoaverageincomelevels.Third,Maruti offeredreliableafter-salesservice,backedbyitsextensiveservicenetworks.11Thereweremorethan15 competitorsinthemarketanditwasnevereasyforacompanytoretainmorethan40percentofthemarketshare.ButMarutihaddoneitconsistentlyoverthreedecades.Maruticarsenjoyedaunique positionintheIndianconsumer'smind.Marutiscoredhigherthan itscompetitorsintermsofprice,fuel efficiency and reliability,anditssaleswereboosted by thepromiseofefficientafter-salesservice. Theuncertainty ofgetting stuck onIndian roadsdue tomachinery failure was effectively exploited by Maruti.AsMarutihadanetwork of3,053servicestations in1,449Indiancities,itspromiseofreliability wasunmatchedby any ofitscompetitors.Intermsoffuelefficiency,Maruticarsprovidedanaverageofthree kilometresmoreper litreofpetrol/dieselcompared toitscompetitors. The resalevalueofMaruticarswas also farhigher than thatofany ofitscompetitors.MarutioffereditsTrue Valueused-carbusiness,withmorethan454 TrueValueoutletsin255Indiancities, reassuring itscustomers thatthey wouldattainthe highestresalevaluefrom anyMarutibrand.ForanIndianmiddle-classfamilyplanning tobuyanewcar, Maruti wasthefirstand mostobviouschoice.

COMPETINGWITHMARUTICARS

Marutihadimplementedveryfewpriceincreasesinitspassengercarsegmentsoverthelast10-12years.

Nonetheless,competitorshademergedineachofthesesegments.OutofMaruti's16carmodels,each

modelhadanywherefrom onetosevenclosecompetitorsfrom Hyundai, TataMotors,Volkswagen, Toyota,HondaorChevrolet(seeExhibit5).However,despiteintensecompetition,Marutihadretaineditsleadershippositionin mostsegments.Infact,itwassopervasiveabrand thatsomeofitsmodels competedamong themselves.Forexample, itsAltomodelcompetedwith the Maruti800, and the Wagon Rcompetedwith theRitz.Marutihadmaintained its "people'scar" imagesinceitsinceptionby strategicallykeepingpriceslowandpositioning entry-levelcarsforfirst-timebuyers.Mini-segmentcars, whichconstitutedmore than80percentofMaruti's totalsales,carried price tags thatwereatleast20-30 percentlower thanthoseoftheirnearestcompetitors.

Thebestselling mini-segmentmodelsofMarutiwere theAltoand the800.Thepricesof thesecarshad remainedstagnantforalongtime.Infact,inmanyinstances,thepricesofthesecarshadbeenreduced. Forexample,thelaunch priceoftheAltoLXmodelwasINR299,00012in2002,andthepricewas subsequently reducedyearafteryearuntil2009,whenthepricewasINR257,000,a reductionof approximately14percent aftersevenyears.Thepriceof the800modelwasINR281,000 in2002,which wasreduced toINR221,000in2010,adropof21percent. ThepriceoftheWagonRwasreduced from INR359,000toINR338,000during thesameperiod. However,Marutiwasabletoincreasetheprice marginally forthecompactandmid-sizesegmentcars overthisperiod,whichboosted therevenueofthe company.

ThepassengercarmarketinIndiahad witnessed intensepricecompetition.Itwassointense thatnota singlepricechangebyanyoftheplayershadgonewithoutareactionfromrivalfirms.Ifonelooked carefullyatallthemodelsofthedifferentbrands,theintensityofthepricewarwasevident.Specifically, inthecaseoftheMarutiAlto,evenMaruti'sclosecompetitorsHyundaiandTatacouldnotraise thepricesoftheircarsover theyears; they hadtoreducethepricesoftheirmodelstoretainmarketshare. Forexample,inApril2004,whenthepriceoftheMarutiAltofellby around7to8percent,theHyundai Santropricecorrespondinglyfellby4.6percent.Similarly,in June2009,whentheMarutiAltopricefell by 8.8percent, theHyundaiSantropricefellby 7.7percent,whilethe TataIndicapricefellby 9.8per cent.Though itwasnevereasyforcarmanufacturersto reduceprices, theywereleftwith nochoicebutto selltheirproductsatreducedorstagnantprices.Evenforthemid-sizeandcompactsegments,Maruti couldnotincreasepricewhenitwishedtoduetopricecompetition.Thoughthecompanyhadbeenable toretainitsleadershipposition, itsmarketsharehadfallenovertheyearsduetotheintenseprice competition.

In2001,MarutihadtotalrevenueofINR70.21billion,whichincludedotherincomewithnetsales. There wasasteady rise inMaruti's revenueeventhoughsalesvolumesfellfrom 2011 to2014.In2014,Maruti registeredsalesrevenueofINR445.43billion,ariseofmorethan 500percentin14years(seeExhibit6).EventhoughMaruticouldnotraisethepricesofitsmini-segmentcars,theriseinsalesrevenuewas mainlydue to arisein unitsalesand marginalincreases inthepricesofitscompactcars.

INPUTCOSTS

Thepricesofrawmaterialsforcarshadrisensignificantly since2001.Basicmetalpriceshadincreased sharply,exceptfor thepriceofaluminum.Steelwas themajorrawmaterialforcars,andthepriceofsteelhad increasedbyatleast threetimes(seeExhibit7)since2001.13Apartfrom steel,otherinputsfor automobilessuchascopper,leadandrubber(seeExhibit7)hadgoneupincostbyatleast240percent.

Eventhepriceofaluminumhadexperiencedamarginalriseof7percent.Theonlyrawmaterialfor whichtherehadbeennosignificantprice risewaspalladium,butitsusageincar-making wasrelatively negligible.Apartfrom thesematerials,thepricesofothermaterialsandinputssuchaselectricityandfuel hadgoneupduringthesameperiod.Theriseininputpriceshadbeenasmuchas300-400percent. Specifically, steelandrubberpriceshad significantly raised thecostofproduction.

LabourCosts

The costoflabourhadgoneupsignificantly dueto therise ingeneralprice levels(inflation) inIndia. Though Marutidepended heavilyon contractuallabourers tocutdown onlabourcosts, ithad to keeppace withthemarketintermsofcompensationandperksinordertoretainemployees.Thewagedisparity betweenMaruti'sregularemployeesandcontractualemployeesinthepasthadledtoHR issues thathad givenMarutimuchbadpublicity.ThetragediesoftheManesarplant14 hadforcedMarutitorevisitthe compensationpackagesgiventoitsemployees. Thishad resulted in furtherrisingemployeecosts. The employeecosthadbeena mereINR1.99billionin2001,buthad risentoINR10.69billionin2013-2014 (seeExhibit6).Itmay benotedthatalong withMaruti'scosts,thelabourcostsperunitfor itscompetitors had alsorisen accordinglyduringthesametimeperiod.

SellingCosts

Withtheautomobilesectorbeing sofiercely competitive,Marutineededto spendalotonpromotional activities.Thedistributionandchannelcostshadalsorisenwiththeriseinfuelprices.15 ForMarutito retain itsmarketshare, ithadtoengageinextensiveadcampaignsontelevisionand throughotherpromotionalavenues. Thecostofadvertising ontelevisionhadriseneachyear,resulting in increased spendingonpromotion. ThepromotionandtelevisioncostshadrisenfromINR6.33billionin2001to INR64.99billionin2014(seeExhibit6).Inpercapitaterms,expenseshadrisenfromamereINR18,069 to awhoppingINR56,266 percarduringthesameperiod.

KEEPINGDOWNCOSTS

Theautomobile industrywasatacrossroadswhere thecostsofrawmaterialsandoperationscontinued to increasesubstantiallywithoutacorrespondingriseinthepricesoftheproductssold.Forcompaniesin thissector, itwasvery difficult tosustain profit levelsthatmettheexpectations ofstakeholdersandthemarket.Itseemedthatthesolutionlay in the implementationofmoreefficientproduction.Aspriceshad remainedsticky foranextendedperiodoftimeandcostskeptrising,firmsneededtoinnovatetobring costsdown.Manufacturerscontinued toaddnew featurestotheirproductsandintheprocessdiscoveredcost-cuttingmeasures.

Marutihadbeendoing thissuccessfully formorethantwodecades.However,inthescenarioofrising costs, thecompany faced majorchallenges, as therewasno cushion allowing it to passon theburden to consumers.AnyattemptonMaruti'sparttoraisepriceswasmetwithapricecutbyitsrivals.Yetthe rivalfirmswerealsofacingthesamechallenges;infact,thechallengeswereworseforthemthanfor Maruti.Theonlyalternativeforthemanufacturerswastokeepthecostsofproductiondownthrough

increasedefficiency.Asincreasing thepriceformostMarutimodelswasoutof thequestion,theonly solutionlay inachieving technicalefficiency andeconomiesofscale.Thegapbetween theaveragecost andthepricewasquickly shrinking foreachmodel.Therefore,to remainrelevantin themarket,Maruti hadto innovateconstantly tocutdowncostsand achievethe rightscaleofproduction.Achieving economiesofscalewastheonlysolution inthe faceofrisinginputand labourcosts.

FUELPRICESANDDEMANDFORPASSENGERCARS

TheriseinthepriceofcrudeoilhadnothelpedthecauseoftheautomobilesectorinIndia.Fuelprices hadincreased,whichsignificantlyimpactedthegrowthofthesector.In2014,whileaddressingthe media,MarutichairmanR.C.Bhargavainfactput the blamefordeclining sales squarely on increases in thepricesofpetrolanddiesel. Thesepriceshadincreasedby20percentinthelasttwoyears,adversely impactingcarsales. ThepriceofpetrolwasderegulatedinIndiaandwaslinkedtocrudeoilprices. Thepriceofcrudeoilhadincreasedfrom $25.64perbarrelin2001 toaround$110perbarrelin2014(see Exhibit7).Apartfrom theriseincrudeprices,localtaxesonpetroleumproducts wereveryhighinIndia, whichfurtherraisedtheprices.Thedieselpricewasregulatedandkeptlowthroughsubsidies.This helpedcarmanufacturerslikeMarutitochargeapremiumondieselcars.However,thepriceofdiesel wasslowly being deregulatedinIndia. Withanewuniongovernmentthatwasfirmly focused onreforms, thedieselpricewouldsoonbederegulated.Oncethisoccurred,dieselvariantsofcarswouldlosetheir edgeoverpetrolvariants.Thederegulateddieselpricewouldfurtheradverselyimpactthedemandfor automobilesin India.

PROFITABILITY

Marutihadbeenabletomaintainasteadyriseinprofitsdespitechallengesthatwerebeyondthecontrol ofthecompany,suchasincreasedcostsandfuelpricesthataffectedthedemandforcars.In2002,it postedanetprofit16ofINR1.04billion,amere1.5percentofnetsales.In2014,Maruti'snetprofitshad risento INR27.83billion or6.3percentofnetsales (seeExhibit6).Marutiremained focused on maximizing shareholders'wealthdespite thecompetitivemarketenvironment.Each year,Maruti's financialresultsexceededmarketexpectations.

DECISIONTOENTERGUJARAT

Marutihad beencontemplating entering Gujaratand setting upaplantwith aninstalledcapacity of 300,000unitsperyearwithaninvestmentofINR60billion.Itwasexpectedthatanynewfacilitywouldbemoreefficient,asitwoulduse thelatest technologyandsubsequently thecostofproductionwouldbe lower.Therefore,onceoperational,thefacilitywouldhelpMarutiachievebettereconomiesofscaleso thatitcouldcompetebetterandsustain itsprofits.However,setting upanewplantwasamessy affairin India,withregulationsrelatedtoeverything from landacquisitiontoobtainingclearances from several ministries.TheTataNano'sSingurplantdebacle17wasstillfreshineverybody'smemory.Bhargavahad variousquestions toconsider.Couldhe findaway toincreaseprices toachievehigherprofitability,thus avoidingthecapitalexpenditureofbuildingaplant?Wouldthebuildingofanewplantreallysustain profitsorwouldittakesolongthatitwould notbeworththeinitialinvestment?

EXHIBIT1:DOMESTICSALES,EXPORTSANDTOTALSALES(UNITS)OFMARUTICARS

2013-14

2012-13

2011-12

2010-11

2009-10

2008-09

2007-08

2006-07

2005-06

2004-05

2003-04

2002-03

2001-02

2000-01

792167

764842

674924

561822

536301

472122

362426

352404

350814

1155041

1171434

1133695

1271005

1018365

Total Exports Domestic

Source:VariousannualreportsofMaruti;"OurFinancials,"MarutiSuzuki,www.marutisuzuki.com/financial.aspx,accessed September12,2014.

EXHIBIT2:MOTORVEHICLEPRODUCTION,CARPENETRATIONANDPERCAPITAINCOMEOFSELECTCOUNTRIES

Country	MotorVehicle Production(in2014)	Automobile Density(Carsper1,000 People)	PerCapita Income inUS$PPPin 2013-14
India	4,145,194	12	$3,843
China	19,271,808	44	$9,055
Brazil	3,342,617	178	$11,747
Russia	2,231,737	233	$17,518
U.K.	1,576,945	457	$36,569
France	1,967,765	481	$35,295
U.S.	10,328,884	423	$51,714
Japan	9,942,711	453	$35,855
Germany	5,649,269	517	$38,666

Note:Percapita income (PPP)refers to howmanyU.S.dollars are required to buya pre-defined basketofcommoditiesindifferentcountries.Itisdifferentfrom theofficialexchangerateconversionofpercapitaincome.Itdiffersfrom countryto country,basedonthepurchasingpowerofacurrencyinthedomesticeconomy.Forexample,ifonerequiresUS$100to buya predefined basketin theUnited States,and ifthe same basket can be purchased in IndiaforINR4,000,then the PPP exchange rate isINR40/US$1,whereastheofficialexchange rate isaroundINR60/US$1.Percapita income in US$PPPisa betterindicatorof the affordabilityofbuying a carthan nominal percapita income.

Source:The WorldBank,"Passengercars(per1,000people),"http://data.worldbank.org/indicator/IS.VEH.PCAR.P3, accessed September12,2014.

EXHIBIT3:TRENDSINMARKETSHAREOFMARUTIANDITSCOMPETITORSININDIA

(MarketSharein Percentages)

Year	MarutiSuzuki	Hyundai Motors	Tata Motors	Mahindra & Mahindra	ToyotaMotors	Others
2002	50	13	13	7	4	13
2003	46	15	15	7	4	13
2004	46	14	16	8	5	11
2005	46	13	17	8	4	12
2006	46	14	17	7	4	12
2007	46	14	16	6	4	14
2008	46	14	15	8	4	13
2009	47	16	15	8	3	11
2010	45	16	15	8	3	13
2011	45	14	14	7	3	17
2012	44	14	13	8	6	14
2013	49	21	6	7	3	13

Note:Figureswere rounded off.

Source:DatacompiledbytheauthorfromSocietyofIndianAutomobileManufacturers,www.siamindia.com/;ICRALimited, www.icra.in/Files/ticker/PV-Industry-201103.pdf;ShallySethMohile,"MarutiSuzuki'sMarketShareRisestoHighestin

ThreeYears,"LiveMint,January13,2014,www.livemint.com/Companies/z2zcAjzlyOe1IlqMiRfkwJ/Maruti-Suzukis-market-

share-rises-to-highest-in-three-years.html;andRaviKishoreOakuri,"MarketShareofAutomobileCompaniesinIndia2013: Top Player in Industry," July 6, 2014, www.currentweek.com/market-share-of-automobile-companies-in-india-2013top-

players-in-industry/.Sources accessed September18,2014.

EXHIBIT4: EX-SHOWROOMPRICESOFMARUTICARSANDCOMPETITORS

(INRin hundredthousand)

Year	Maruti AltoLX	Maruti 800	Hyundai Santro	Tata Indica	Chevrolet Spark	MarutiSwift Dzire LXI	SX4 VXI
Aug-02	2.99	2.81	3.36	3.19	**	**	**
Apr-03	2.99	2.56	3.36	3.17	**	**	**
Nov-03	2.87	2.56	3.46	3.14	**	**	**
Apr-04	2.65	2.26	3.3	3.14	**	**	**
Aug-06	2.81	2.24	3.24	2.75	**	**	**
Sep-07	2.81	2.2	3.28	3.38	3.09	**	6.18
Oct-08	2.82	2.29	3.48	3.65	3.17	4.89	6.54
Jun-09	2.57	2.06	3.21	3.29	3.17	4.54	6.36
Feb-10	2.5	2.21	3.44	3.38	3.19	4.6	6.68
Oct-11	3.01	2.22	3.76	3.24	3.54	5.32	7.73
Apr-12	3.01	2.22	3.76	3.24	3.75	5.3	7.73
Sep-13	3.12	2.42	3.76	3.4	3.57	5.38	7.73
Apr-14	^^	^^	3.66	3.85	3.45	4.85	7.15

EXHIBIT5:MARUTI'SCOMPETITORSBYMODEL

Model	LaunchDate	Competitors
800	1983	TataNano
Omni	1984	TataNano,TataVenture
Gypsy	1985	MahindraTHARcRDe,TataSumo,MahindraXylo
WagonR	1999	NissanMicraActive,Hyundaii10
Alto	2002	HyundaiSantro,ChevroletSpark,TataIndica
Swift	2005	TataVista,Hyundaii20, kodaFabia,VolkswagenPolo,ToyotaEtiosLiva
SX4	2007	FordFiesta,HyundaiVerna,HondaCity,kodaRapid,VolkswagenVento,RenaultScala,NissanSunny
SwiftDzire	2008	HondaAmaze,HyundaiXcent,MahindraVerito,ToyotaEtios,FordClassic, ChevroletSail,TataManza
A-Star	2008	ChevroletBeat,NissanMicraActive,FordFigo
Ritz	2009	TataVista,HyundaiGrandi10,HondaBrio,NissanMicra,RenaultPulse, ToyotaEtiosLiva
Eeco	2010	TataVenture,TataWinger
AltoK10	2010	ChevroletSpark, TataIndica,Hyundaii10
Ertiga	2012	Toyota Innova, Mahindra Xylo, Nissan Evalia, Tata Sumo Grande, ChevroletTavera,ChevroletEnjoy
Alto800	2012	TataNano,ChevroletSpark, TataIndica,HyundaiEon
Stingray	2013	ChevroletBeat,ChevroletSail
Celerio	2014	Hyundaii10,ChevroletBeat,HondaBrio

EXHIBIT6:YEARWISEREVENUE,COSTSANDNET PROFITSFORMARUTI

(Asof March31 of each year;INR inbillions)

Year	Total Revenue	Raw Materials	Employee Cost	Selling& Administrative &Other Manufacturing Expenses	NetProfit
2001	70.2	58.8	1.99	6.33	-2.69
2002	75.3	58.3	2.27	6.95	1.04
2003	73.6	55.6	2.17	6.78	1.46
2004	94.8	69.7	2.93	6.07	5.42
2005	114.6	85.6	1.91	6.72	8.53
2006	126.8	93.3	2.11	8.09	11.89
2007	150.5	107.3	2.26	10.95	15.62
2008	190.6	137.9	3.46	13.39	17.30
2009	211.7	157.6	4.63	18.08	12.18
2010	301.2	223.6	5.38	24.31	24.97
2011	375.2	285.5	7.03	35.22	22.88
2012	364.1	282.3	8.43	32.67	16.35
2013	444.1	305.7	10.69	64.99	23.92
2014	445.5	313.14	13.68	59.22	27.83

Source:CapitalineDatabases,www.capitaline.com,accessedSeptember12,2014;andvariousannualreportsfrom Maruti, MarutiSuzuki India Limited, "OurFinancials,"www.marutisuzuki.com/financial.aspx,accessed September12,2014.

EXHIBIT7:TRENDSIN COMMODITYPRICES(MAJORRAWMATERIALS),2001-2014

Year	Aluminum US$/Tonne	Copper US$/Tonne	Lead US$/Tonne	Rubber US$/Tonne	Palladium US$/Ounce	Brent Crude Prices $/Barrel	Iron,Steel& FerroAlloys(Index)
2001	1,615.65	1,787.05	477.89	693.70	1,041.55	25.64	137
2002	1,368.59	1,503.60	512.84	647.90	409	19.48	137
2003	1,378.28	1,647.35	444.78	1,011	255.32	31.29	150
2004	1,606.49	2,423.11	758.82	1,371	216.58	31.18	201
2005	1,833.94	3,169.18	953.61	1,329.40	186.03	44.28	244
2006	2,377.45	4,733.67	1,256.62	1,932.40	274.32	63.57	237
2007	2,808.34	5,668.69	1,665.11	2,110	337.05	54.30	271
2008	2,445.08	7,060.10	2,608.47	2,705	374.20	91.45	337
2009	1,412.79	3,220.20	1,134.64	1,607	188.63	44.86	307
2010	2,234.84	7,385.67	2,370.22	3,202.40	434.10	76.37	310
2011	2,439.13	9,554.75	2,597.44	5,591.90	793.10	96.29	349
2012	2,143.82	8,042.97	2,093.74	3,856.90	659.14	110.99	386
2013	2,037.70	8,048.76	2,339.82	3,271	712.59	112.93	405
2014	1,726.20	7,299.46	2,150.20	2,365.90	734.14	107.57	412*

1. What kind of market structure prevalent in the Indian Automobile industry in India? what are the features of this market? What are the Maruti's competitive advantages and how can it sustain its profitability in the future? (15 marks)

1. Outline the important determinants of demand and supply of automobiles. How are cross and income elasticity of demand relevant to Maruti's managerial decisions? (15 Marks)

1. What are economies of scale? Where do the economies of scale for Maruti come from? (10 Marks)