MGA sales:Q1

1
Cost Innovation for Tier 2 / 3 Market
penetration. A case study
2

• Rural Market The Growth Story..

• Rural India is getting bigger day by day-
  triggered by growth in the hinterland smaller
  cities.
• No company can afford to ignore rural India for
  its tremendous potential.
• Eg
• In last 2 years, Consumer durables electronics
  witnessed a growth of 30 in rural vs. 10 in
  urban markets.
• Mobile penetration of over 800 million with over
  53 in rural India.
• FMCG Giant HUL- 40 products are consumed in
  rural markets.
• Moreover Rural markets are less affected by macro
  economic situations as they operate in their
  small eco system.

3

• Rural Market Drivers

• Rising Government investments thru various
  schemes like MGNREGA.
• Schemes under NABARDsupport to agriculture
  village industries.
• Retail chain companiesguide farmers on
  sustainable agriculture practices.
• Higher Minimum Support Prices (MSP) ensure
  better returns to farmers.
• In urban-rural clusters big farmers dispose of
  portions of their lands to have enough liquidity
  higher standard of living.
• Special focus by government on education skill
  building-
• Increasing technology awareness among youth.
• Skills for Job opportunities in BPOs,
  hospitality Service sector.
• Today Rural India aspire for the same products as
  used by their Urban counterpart.

4

• Rural Market Challenges Vs Opportunities

• Rural markets are dispersed.
• Companies need to develop the understanding of
  their prospective customers.
• Marketers need to understand
• Their local needs develop appropriate products
  and services to meet those requirements.
• Develop a unparalleled distribution channel to
  make these products and services available to
  them at an affordable cost.
• How it is done in Maruti Suzuki?

5

• Case study -Maruti Suzuki India Ltd.

• As a Passenger Car Manufacturer, Maruti Suzuki
  provides total mobility related solution to its
  customers Not only the vehicle but
• Finance to buy the car.
• Insurance
• Extended warranty
• Accessories
• Service
• Spares
• .and all at the most affordable price.
• To ensure this, during the entire ownership
  cycle, we had to build a responsive channel
  network.

6

• Cost vs. benefit

• But building a network involves
• Capital Cost.
• Operating Cost.
• Promise to our customers - Lowest Cost of
  ownership

7
Distribution verticals for the Supply Chain

• There are 3 verticals to ensure
• Sales to ensure reach to the prospective Car
  buyers.
• Service to ensure reach accessibility for Car
  owners.
• Parts to ensure reach availability of Genuine
  parts.

8
Distribution verticals for the Supply Chain
9

• Sales Operations

• Locations Urban Cities
• Total area Over 1- 2 acres.
• Display the entire range of cars.
• One stop shop for all customers needs.

• Locations Rural pockets
• Total area Few hundred sq feets.
• Space enough to display 2-3 cars the focus
  model.
• Nearest touch point for rural customers. Basic
  facilities of Test drive, finance Insurance..

10

• Sales Operations - network

• Sales network as on1st Apr, 2012
• More than 1100 sales outlets
• covering 801 cities.
• Concept of E Outlets to reach in rural
  pockets.
• Resident Dealer Sales Executives (RDSEs)
• Posted in rural pockets covered by E outlets.
• Resident of same villageWell versed with the
  geography people.
• Known face in the village.
• Takes pride in representing the brand Maruti.
• Operating cost low.
• Operates from home.

11

• Service Operations.

Message to customers Wherever you go, you
are not far away from a Maruti workshop Buildin
g a Service facility involves Cost
12

• Service Operations- network.

• Location-Rural pockets with no dealer reach /
• Cities with high load.
• A/B/C categories on basis on facilities.
• Low on investments.

• Location Base City.
• Large workshops.
• As high as 30-40 bays.
• Service Body shop.
• High capital equipment cost

• Location- E Outlet
• Small set up.
• 2-3 bay workshop.
• Free paid service.
• Minimum tools.

13

• Service Operations- network

• Service network as on 31st Jul, 2012
• 1345 Dealer workshops covering 817 Cities.
• 1650 MASS workshops in 1097 locations.
• 601 Cities exclusively served by MASSs.
• 2995 service workshops covering 1418 cities.
• In FY1112-
• Inaugurated high altitude MASS at Kaza Spiti
  Motors
• (altitude of 3740 Mtrs (12270 ft) above sea
  level).
• Activated the most remote and farthest
• workshop Andaman and Nicobar Island

14
Spare Parts Operations.
If a car owner in Hubli which is about 2800 kms
from Gurgaon asks for a Oil Filter for his M800
at his favorite workshop, immediately and at a
price he is ready to pay for it.
Right part M800 Oil filter Right
quantity The quantity I asked for. Right
place Favourite workshop in Hubli Right
time Immediately. Right Price At a price
commensurate to the value provided. Right
Customer Deliver to me only. How to make it
possible? Distribution Channel innovation
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• Spare Parts Operations.

As per SIAM.
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Channel Pre 2004
Parts Accessories Division.
Single Channel
Dealer workshop
MASS
Retailers
Garage
Inhouse Workshop
After market - End customer- Car service
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Channel Post 2004
Parts Accessories Division
Two Channels
Dealer workshop
MGP Distributors
Retailers
MASSs
Garage
In house workshop
After market- End customer- car service
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Concept of Retail Outlets

• To expand further to potential pockets, retail
  outlets opened.
• Air conditioned Outlets
• Unique Buying experience.
• Dedicated helpdesk.
• Retail outlets in over 170 locations

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Concept of Express Outlets

• To penetrate market further - Require more touch
  points.
• Challenge Cost
• Solution Express outlets -Trimmed down version
  of retail outlet.
• Benefits
• End customer
• Attractive displays.
• Distributor
• Low investments.
• Early start of operations.
• Early paybacks.
• Low operating cost.

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• Cost Innovation in the distribution channel only
  does not suffice.
• There has to be innovations across the chain

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Innovations across Supply Chain

• Low Inventory holding cost Just In time (JIT)
  model
• Through Technology enabled seamless integration
  of ERP interfaces.
• Automatic replenishment model for channel.
• E-enabled procurement model for suppliers.
• Low working capital for channel Reduction of
  lead time.
• Increasing touch points near to customer.
• Regional stock yards Low transit time
  optimised logistics cost.

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And the journey continues