Maruti Suzuki Case Study

Situation Analysis

● Maruti Suzuki India Limited was founded as Maruti Udyog Limited by the
Government of India in 1981 and entered into a joint venture with Suzuki Motor
Corporation the next year. It was the country’s largest passenger car company for
almost three decades and was the first Indian car company to have crossed 10 million
in sales. It had a total of four plants, three at Gurgaon, and one at Manesar. It had 15
brands and more than 150 variants by 2011.
● Between 2006 and 2012, the company posted a growth rate of 135% in its sales,
which reflects its competence. It had established an extensive network of sales and
service outlets, and dealer service centres across the country. It had also penetrated
markets in Europe, Latin America, Africa and Oceania, and had set up a pre-owned
cars division called Maruti True Value.
● The company was ranked number one in the prestigious JD Power Customer
Satisfaction Index. This highlighted the fact that the company put a high value on
caring for customers.
● MSIL diversified its product lines to cater to the needs of every kind of customer in
the passenger car segment. It primarily promoted itself as an economy-oriented
company that provided fuel-efficient and relatively lower-priced cars.
● The company faced labour unrest, strikes, and agitation, starting in 2011 when the
management tried to prevent the workers from joining a new union. The workers had
raised various issues that were neglected. The plant had to be shut down, and the
ensuing violence caused the death of a company executive. This incident led to losses
of INR 900 million daily for the company, along with the loss of market share and
problems in its distribution channels.

Effect of the Strike

● The factory at Manesar, which rolled out 1700 cars a day, was shut down.
● Sales fell by one-fifth, and they incurred a loss of INR 900 million per day.
● There was a build-up of massive levels of backlog – it grew to 10,000 units for Swift
and Dzire models.
● The waiting period of cars increased considerably, which led to the cancellation of
bookings.
● Competitors started to take control of the market.

Causes for Communication Breakdown

No. Problem

1 Communication barrier due to ● There was a lack of an effective

organizational structure communication channel between the
management and the employees.
● The company bluntly fired or suspended
workers instead of trying to discuss and
resolve the issues that they were facing.
● The workers raised issues such as low
wages, incentive cuts, and poor work
conditions, which were routinely ignored by
the management.

2 Unethical communication ● The management pressurized the workers

against joining the new trade union.
● They forced the employees to sign the
agreement to join the pro-management
Maruti Udyog Kamgar Union (MUKU) and
a good conduct bond, which did not go well
with them.
● The workers resorted to strikes and violence
instead of trying to get their message across
in a more amicable manner.

3 Cultural barrier ● The workers were not used to the Japanese

culture of working for long hours with very
short breaks in between, and this made them
feel overburdened.
● This also led to a demand for wage
increment by the workers.

4 Lack of trust ● There was an extreme lack of trust between

the management and the workers, which led
to the formation of a new union.
● The company did not trust their workers and
started hiring contract workers which further
affected the morale of the existing workers.
5 Lack of awareness ● There was a lack of awareness at the top
management level about the happenings at
the ground level. They were unclear about
the intentions of the union leadership.
● Burning a man to death is never an accident,
and later investigations proved that the
violence was planned.

6 Problems at the industry level
(Macro-level issues)
● The automobile industry was going through
a slowdown, which led to several cost-
cutting measures like employee layoffs,
dependence on more contract workers, and
delays in wage hikes for permanent
employees. This further added to the
problem.

Maruti’s revival of its production:

● Maruti Suzuki resumed production at its plant with heavy security, including 1500
policemen and an Indian Reserve Battalion, on August 21, 2012.
● The contract worker system was done away with, as it was found to be the primary
reason for the unrest.
● The new hiring system was incorporated with a change in laying-off terms in
accordance with the changes in demand.
● A complete background check of the employees was also incorporated to ensure their
credibility.
● The company revived the system of building and providing homes to its employees.
● Over the years, conscious improvement in communication with the workers and
training them to understand the Japanese system produced tremendous results,
including a sense of belonging for the employees.
● The company motivated workers to feel involved in the system.
● The Manesar plant achieved a production level of 25 lakh vehicles in September.
● Focusing on customers from rural and suburban areas played a crucial role in
improving the trust and profits of Maruti.
● By February 2014, the market share had inclined back to 41.3% which had decreased
to 38% in the previous year because of riots.

Case Analysis by: Sai Subramanyam, Kanishka Patra, Kiran B, Mahesh Kurakula, Mantu
Lal