3.

4 VRIO framework of Maruti Suzuki

The VRIO analysis is a way to compare the specific resources of two or more
companies to determine who is stronger in their respective market as well as whose
future looks brighter. VRIO stands for Value, Rare, Inimitable, & Organized to
Exploit. Below i will conduct a VRIO analysis for Maruti Suzuki:-
Based on just-in-time production, the TPS built vehicles based on immediate market
demands rather than in anticipation of future demands. This unique strategy was
created to cut costs and eliminate waste.
Valuable: Yes, because it has been proven to keep production costs low
Rare: Yes, just-in-time production is a popular strategy used by companies in all
industries; however MARUTI SUZUKIs methodology is very rare.
Inimitable: Yes, many companies have tried to recreate the system; however none
have been able to do it in as efficient of a manner.
Organization: Yes, MARUTI SUZUKI has been using this system since the 90s and
has been perfecting it along the way.
Competitive Implication: This creates a sustained competitive advantage

Time-Based Competition Strategy (TBC)
Process that includes both reduced cycle time and reduced costs, while increasing
profits and accelerating growth.
Valuable: Yes, in addition to the benefits mentioned above, TBC creates increased
value differentiation, increased variety and flexibility, and strengthened relationships
with customers.
Rare: No, other companies use this system; however MARUTI SUZUKI and other
Asian companies were one of the first ones to start using it.
Inimitable: No, other companies such as Honda and Tata use TBC to improve their
leading market share within their respective industries
Organization: Yes, the company has adopted the strategy and has been very
successful in doing so
Competitive Implication: This creates competitive parity


SCENARIO ANALYSIS
4.1 INTRODUCTION
Fuel is the heart of the automobile business. Even after manufacturing of the motor
vehicle they are quiescent or hidden. They can be only used with the use of the oil or
natural gas or coal. Now these all are fossil fuels which have been formed from the
living organism or trees after they get perished and transformed in fossil fuel after
millions of years. These are limited and insufficient resource. In the near future these
resources can be useless and automotive industry needs to look one step ahead to
develop other alternative source of energy to run the industry in desired speed.
Introduction of two metaphors (Future) - We have chosen metaphors of Ocean
and Lake, where Ocean future has no boundaries for fuel, in other words fuel is
forever and in Lake future fuel will not last for long.

4.2 Scenario ONE Ocean Future: No boundaries for Fuel
Ocean future is based on unlimited fuel availability, where the automotive industry is
most profitable sector. Maruti Suzuki is one of the major automotive companies in
the industry. The main problem for the business will be pollution as there will be no
scarcity of fuel. And how the business will survive in the future scenario? Who are
their future competitors? What strategy they should adopt to take competitive
advantage? And the future PEEST analysis trends of the company.

4.2.1 Predicted Global Impacts of Ocean future
In the Ocean future world is full of fuel. The automotive industry will never run out of
fuel. In other words, company can reduce its R&D expense in alternative fuel engine
research. Ocean future represent the unlimited availability of fuel, as a result fuel will
be cheaper than today. In the present scenario having a car is not a big deal but
what really matter is to run them. Since the fuel is unlimited there will be huge
number of vehicles on the road.
It has some bad impacts too. As mentioned earlier that fuel will not considered as
scarcity and consume more fuel, as a result there will be more carbon emission
exhausted in the environment and pollution will be more then today.




4.2.2 PEEST analysis of Ocean future
PEEST analysis is related with the environmental effects on a business.
The short form stands for the Political, Environmental, Economic, Social and
Technological issues that could affect the strategy of a company.
It is a useful way to summarise the external environment in which a company
operate. However, it must be followed by consideration of how company should
respond.

Political Trend
What will be the political rules and changes? Due to unlimited fuel stock government
will not impose any strong political rule for fuel usage in the ocean future.
Government will have to focus on pollution and carbon emission reduction rather.
Fuel freedom will convert in to freedom of fuel usage and as a result there will be
huge amount of CO2 in to the environment. Next step would be to take step forward
to improve traffic system and infrastructure development to manage the increased
vehicles on the road.

Economical Trend
What will be an economical issue? Economic situation of the Ocean future will be
good for the people. Today fuel is running out of stock and a major issue for the
automotive industry and it affects consumers too. In the ocean future fuel is cheap,
as a result cars will be cheap and lower income people can afford to buy a car. Other
side Transportation will be cheaper too for those who have no car and depend on
public transportation. Every coin has two sides; other side of the economic situation
will be health issues. Health expenditure may raise high due to pollution.

Social Trend
What will be social expectation and needs? Since the world will never run out of fuel,
cars will be comparatively cheaper than today. So dream of having a personal car
will come true for everybody. People now have access to the offices, home
appliances and automobiles. Digital devices have made life easier for everybody.
Things that are expensive at present will be available within budgets, and
automobiles will be one of those. There are few situations that will bring sudden
changes in the automotive industry. The life style of the people in ocean future is
very high and trendy because this future describes of well-being of economic
condition of people due to low unemployment.
Environmental Trend
What will be the environmental situation in the ocean future? On the other side it is
totally a different situation in environment of ocean future. As described earlier that
fuel will be cheaper so it will consume more fuel and as a result, indiscriminately use
of fuel will cause more air pollution which in turn leads to more global warming and
greenhouse effect. These issues will have impact on the health of people, water level
in ocean, fertility of lands, crops, rain and atmosphere.

Technological Trend
What will be the Technological advantage and changes in the Ocean future? Fuel
freedom will help automotive company to invent new luxury rather than spending on
R&D for fuel alternative, so MARUTI SUZUKI can come up with technology, safety
and comfort innovation. Since the cars will be cheaper than today, common man can
afford to have a luxury car.
4.2.3 Strategy & Implications for Ocean Future
As discussed in the PEEST analysis that pollution will be the major issue globally;
MARUTI SUZUKI should invest more in R&D to invent engine that help to reduce
carbon emission. Ocean means large market and if MARUTI SUZUKI wishes to
reach to each and every market of the world then MARUTI SUZUKI should
collaborate with other dominant players in the automotive industry such as BMW,
Mercedes and Bugatti. Moreover to gain its market share and expand the business
MARUTI SUZUKI should also concentrate in making the truck and other heavy
loaded motors globally.











4.3 Scenario TWO Lake Future
Lake future is opposite of ocean future where fuel will not last for long, in other words
Will World run on carts and pedals?
4.3.1 Predicted Global Impacts of Lake Future
Maruti Suzuki is A manufacturer of fuel based automobile products and fuel is basic
need. According to the lake future, fuel will not last for long. Researchers says Oil
will last for 40-50 years, Natural gas will last for 60-75 years and coal will last for 155
years. If it happens then there is a possibility that world will run on pedal carts. Fuel
is the basic need for automotive industry. If there is no fuel then the business will
also not exist. As a result unemployment will increase not only in the automotive
industry but associated industries like parts and accessories industry and oil
industry. Technology like mobiles and internet will be in the centre point for the
purpose of communication. Since there are no cars on the road then there is no
pollution and lake future will be pollution free. On other side there is a possibility that
automobile manufacturer like Maruti Suzuki develop an alternative for the fuel and
give a sustainable advantage to automotive industry and industry will run and grow
continuously.

4.3.2 PEEST analysis of Ocean future
PEEST analysis is related with the environmental effects on a business.
The short form stands for the Political, Environmental, Economic, Social and
Technological issues that could affect the strategy of a company.
It is a useful way to summarise the external environment in which a company
operate. However, it must be followed by consideration of how company should
respond.

Political Trend
Lake future is represented by depletion of fuel. So in such condition political factors
have much more impact on the automotive industry. Since there would be no fuel in
this scenario Government need to change or eliminate laws and legislation related to
fossil fuel and develop new laws and legislation in concern with the Department and
Bodies of Government which play important role in the development of the
automotive industry. In this future, Governments responsibility towards technical
advancement and development is equivalent to that of automobile companies.

Economical Trend
Being considerable contributor to the economy, automotive industry will continue to
do so. In lake future economy would be affected by companies engaged in the
invention and development of the new technologies. These companies will have
command over economy because without these companies auto industry will be
nothing and without automotive industry transportation would be so tough that
people will travel once in a while

Environmental Trend
Lake future is represented by fuel free earth and it is also represented by new
inventions and technologies. So air pollution passed on by automotive industry would
be reduced to almost nil. Pollution related health problems, greenhouse effect and
global warming will be reduced. Automotive industry will not need to search for the
low emission engines and can instead can invest to find an alternative source which
can be easily available and cheap to afford.

Social Trend
In lake future there are two possibilities - one is without fuel and the other is with
MARUTI SUZUKI. Without fuel auto industry would collapse and people would suffer
without any transportation vehicles. People would be depended on telephone or
internet for communication with each other. This may affect the relationship of
people with each other and shrinkage of relationship.
Other possibility is that MARUTI SUZUKI become exclusive producer of Motor
vehicles with alternative energy source and succeeds to sustain the transportation
system. Then MARUTI SUZUKI would be only way of transportation and other name
of life.

Technological Trend
Lake future itself is Techno-Future, in which new ideas and technology will change
the whole scenario of automobile industry. Birth of new alternative energy source will
give new definition to industry and may bring sustainable advantage to industry so
that for many years these sources remain the soul of the industry and run the
industry. Technological advancement will be continued to eliminate the drawback of
existing situation and to find solution for that.


4.3.3 Strategy & Implications for Lake future trend
Strategy may be described as the model or plan that integrates an organizations
major goals, policies, and action series into a cohesive whole. Ocean future strategy
is based on Long-term action plan for future goals. Strategy is a political procedure
and it works through culture Nature of culture in which the business is operating,
structure Type of structure the business has, people people within the
organization and outside the organization, expectations expected expectation from
the organization.
Financial markets will be unstable, rising fuel prices, and increasing taxes on fuel
usage will be some of the problems faced by the automotive industry in the lake
future.
Reduce the cost by producing under the one roof and using long lasting material like
Nano material. Automotive manufacturers must mass-produce the automobiles so
that they are affordable to the consumer which is comparatively cost effective.

















BCG Matrix of Maruti Suzuki
The BCG matrix method is based on the product life cycle theory that can be used to
determine what priorities should be given in the product portfolio of a business unit.
To ensure long-term value creation, a company should have a portfolio of products
that contains both high-growth products in need of cash inputs and low-growth
products that generate a lot of cash. It has 2 dimensions: market share and market
growth. The basic idea behind it is that the bigger the market share a product has or
the faster the product's market grows the better it is for the company.



MARUTI SUZUKI, one of Indias leading automobile manufacturer and the market
leader in the Car segment, both in terms of volume of vehicles sold and revenue
earned


STAR
The Company has long run opportunity for growth and profitability. They have high
relative market share and high growth rate. SWIFT, SWIFT DESIRE AND ZEN
ESTILO is the fast growing and has potential to gain substantial profit in the market.

QUESTION MARK
There are also called as wild cats that are new products with potential for success
but there cash needs are high and cash generation is low. In auto industry of
MARUTI SX4, GRAND VITARA, A-STAR, there has been improvement in the
organization reputation. As they want success not only in Indian market but as well
as in global market.

CASH COW
It has high relative market share but compete in low growth rate as they generate
cash in excess of their needs.MARUTI 800, ALTO AND WAGNOR have fallen to
ladder 3 & 4 due to introduction of ZEN ESTALIO and A STAR.

DOG
The dogs have no market share and do not have potential to bring in much
cash.BALENO, OMINI, VERSA There business have liquidated and trim down thus
the strategies adopted can be either harvest, divest or drop.
BCG matrix can serves as a simple tool for viewing a corporations business portfolio
at a glance, and may serves as a starting point for discussing resource allocation
among strategic business units.





GE NINE CELL MATRIX
The GE/McKinsey Matrix is a nine-cell (3 by 3) matrix used to perform business
portfolio analysis as a step in the strategic planning process.The GE/McKinsey
Matrix identifies the optimum business portfolio as one that fits perfectly to the
company's strengths and helps to explore the most attractive industry sectors or
markets.
The objective of the analysis is to position each SBU on the chart depending on the
SBU's Strength and the Attractiveness of the Industry Sector or Market on which it is
focussed. Each axis is divided into Low, Medium and High, giving the nine-cell matrix
as depicted below.
Different factors can be used to define Industry Attractiveness. Like:-
Market Size, Market Growth Rate, Demand variability, Industry Profitability,
Competitive Rivalry, Global Opportunities, Entry and exit barriers, Capital
requirement, Macro environmental Factors (PEST)
Different factors can also be used to define SBU Strength. Like:-
Market Share, Distribution Channel Access, Financial Resources, R&D Capability,
Brand equity, Production Capacity, Knowledge of customer and market, Caliber of
management. Relative cost position
The factors and their relative weightings are selected. The rating values for each
factor are entered for each SBU and Industry.
Grow Business units that fall under grow attract high investment. Firms may go for
product differentiation or Cost leadership. Huge cash is generated in this phase.
Market leaders exist in this phase.
Hold Business units that fall under hold phase attract moderate investment. Market
segmentation, Market penetration, imitation strategies are adopted in this phase.
Followers exist in this phase.
Harvest - Business units that fall under this phase are unattractive. Low priority is
given in these business units. Strategies like divestment, Diversification, mergers are
adopted in this phase.







MARUTI SUZUKI GE NINE CELL MATRIX

Market Attractiveness: - The attributes of market attractiveness are
Annual market growth rate
Overall market size
Historical profit margin
Current size of market
Market structure
Business Strength: - The attributes of business strength are
Current market share
Brand image
Production capacity
INDUSTRY
ATTRACTIVENESS
BUSINESS UNIT STRENGTH

STRONG

AVERAGE

WEAK

HIGH
INVESTMENT AND GROWTH
INDICA
INVESTMENT AND GROWTH
SAFARI
SELECTIVE
ARIA


MEDIUM
INVESTMENT AND GROWTH
HEAVY TRUCKS
SELECTIVITY/EARNINGS
MARUTI SUZUKI LUVs
HARVEST
NANO

LOW
SELECTIVITY/EARNINGS
MARUTI SUZUKI ACE
HARVEST
INDIGO
HARVEST
--------
Corporate image
Profit margins relative to competitors



ANSOFF Matrix of Maruti Suzuki


For any decision to be taken at corporate level, you need the right strategic tools.
Ansoff matrix is one of them. Ansoff matrix helps a firm decide their market growth
as well as product growth strategies. The 2 questions which the Ansoff Matrix can
answer is How can we grow in the existing markets and What amends can be
made in the product portfolio to have better growth.
From the above two questions, it is clear that Ansoff matrix deals with the companies
external market scenario as well as the product portfolio which the firm has. The
matrix is divided in two quadrants The product quadrant and the market quadrant.
The Product quadrant on the X axis is further divided into Existing products and new
products. The market scenario on the Y axis is divided into existing markets and new
markets. Thus the Ansoff matrix divides a firm on the basis of the products it has
existing products or new products, as well as the markets it is in existing markets
or new markets.
Depending on the characteristic of each, Maruti Suzuki decides its marketing
strategy. These marketing strategies are as follows.
Market Penetration
The company is trying to reach the existing market with product that has existed too.
This is the safest step because it has lesser risk than any other strategies. Usually,
companies use this strategy to attract their competitors customers. Maruti Suzuki
used this strategy when they reached UK market by take over Jaguar-Land Rover,
Maruti Suzuki did not just concentrate on the new products line that they can
produce from the two companies above but instead, Maruti Suzuki still producing
Maruti Suzuki Indica in the market (Maruti Suzuki, 2003).
Product Development
The company offer new product to the present market. This is an important strategy
to give fresh breath to the market. The new product will attract more customers from
the existing market. The first product development of Maruti Suzuki was Maruti
Suzuki Sierra, their first passengers vehicle. Maruti Suzuki Sierra was marketed in
1991. And that was the first step of Maruti Suzuki to develop their product and future
strategy (Maruti Suzuki, 2010).
Maruti Suzuki also did product development when they started to produce Maruti
Suzuki Nano in 2008, Ratan Maruti Suzuki thought about making the world cheapest
car and produced it in the domestic market first, India (Maruti Suzuki, 2009). The
strategy was to sell affordable car to the people in the same time, expanding their
market.
Before that, Maruti Suzuki developed the first mini-truck in India called Maruti Suzuki
Ace. Maruti Suzuki Ace came to the market in 2005 and in 2 years time, they have
sold 96,000 units of Maruti Suzuki Ace (Maruti Suzuki, 2007). By marketing this
product, Maruti Suzuki expand their market to mini-truck segment and become
market leader.
Market Development
Use the present product that belong to the company and offer it to a new market.
Many MNE usually use this strategy to reach wider market domestically and
internationally. Some examples of market development are: expanding to another
country, selling the product to a different market segment, and using the product for
different function (Graham and Allan, 2008).
Maruti Suzuki has developed their market overseas; they reached South Korea
market in 2004, Spain market in 2005, Thailand market in 2006, UK market in 2008,
and many more. Maruti Suzuki sells their existing product like buses, trucks, and
cars in those markets. Maruti Suzuki is planning to make their market even wider by
opening new companies in developing countries such as: Indonesia, Philippines, and
Turkey.
Diversification
This is a strategy whereby the company makes a new product and offers it to the
new market. Diversification has higher risk than another strategies because the
market and the product is new, but in the other side it could bring more profit to the
company as it will bring new customers.
Maruti Suzuki diversified their product when they entered UK market and took over
Jaguar-Land Rover in 2008. It allowed Maruti Suzuki to produced new products line,
for example: Jaguar X-Type and Land Rover LRX.


Grand Strategy of Maruti Suzuki


Grand Strategy Matrix is very useful instrument for creating different and alternative
strategies for an organization. Grand matrix has four quadrants; each quadrant
contains different sets of strategies and the entire firms along with their respective
divisions must fall in one of the quadrant. This matrix has two dimensions
(competitive position and market growth). Suitable set of strategies for each
quadrant are given below:
To test the appropriateness of the diversification strategy and to draw more strategic
options for Maruti Suzuki the Grand Strategy Matrix is used. As Maruti Suzuki has a
strong competitive position and the market growth is slow in the automobile industry,
Maruti Suzuki is placed in Quadrant IV confirming that diversification or a joint
venture can be a good strategy for Maruti Suzuki.
Quadrant IV provides four options for Maruti Suzuki:
1) Concentric Diversification Maruti Suzuki has already diversified its product mix
and includes: Sedans, SUV, MPV, minivans, trucks and heavy machinery. Maruti
Suzuki also covering other customer segment, using Land Rover and Jaguar line for
high income group. Concentric diversification has been taken care of by Maruti
Suzuki.
2) Conglomerate Diversification - Maruti Suzuki has diversified its business portfolio
into financing, housing, communication and other business. Conglomerate
diversification also has been taken as an option by Maruti Suzuki previously.
3) Horizontal Diversification - In horizontal diversification Maruti Suzuki has acquired
Daewoos Truck Division and has acquired Hispano automobile company of Spain
for achieving a better position in the passenger car market.
4) Joint Venture
Last two options offer fast increase in market share. Maruti Suzuki can consider both
options
for its further growth.






















Functional Strategies
Maruti Suzuki believe that they have established a strong position in the Indian
automobile industry by launching new products, investing in research and
development and maintaining financial strength. They are also benefited from the
expansion of their manufacturing and distribution network. Their goal is to position
themselves as a major international automotive company by offering products across
various markets by combining engineering and other strengths and through strategic
acquisitions. Their functional strategy to achieve these goals consists of the following
elements:
Leveraging our capabilities: They have an extensive range of products in commercial
vehicles (for both goods and passenger transport) as well as passenger vehicles.
They have plans to leverage this broad product base further with their strong brand
recognition in India, their understanding of local consumer preferences, well
developed in-house engineering capabilities and extensive distribution network.
Mitigating cyclicality: The automobile industry is impacted by cyclicality. To mitigate
the impact of cyclicality, they plan to continue to strengthen their operations through
significant presence across different segments, wide range of products and
geographies. They also plan to continue to strengthen their non-vehicle business,
such as spare part sales, annual maintenance contracts, sales of aggregates for
non-vehicle businesses, reconditioning of aggregates, sale of castings, production
aids and tooling and fixtures to reduce the impact of cyclicality.
Expanding our international business: They have a two-fold strategy of expanding
their operations into other geographic areas, through strategic acquisitions and by
expanding their product range into select geographies where they have an
opportunity to grow in markets with similar characteristics to the Indian market. Their
international business strategy has already resulted in the continuous growth of their
international operations over the past three fiscal years. For example, they have
consolidated their position in the Ukraine to become the largest competitor in the
light bus market under seven meters and the third largest competitor in the seven ton
GVW light truck segment, in terms of unit sales. TDCV continues to be the largest
exporter of heavy commercial vehicles from South Korea. Additionally acquisition of
Jaguar Land Rover has significantly expanded their geographical presence
Reducing costs and breakeven points: They believe that their scale of operations
provides them with a significant advantage in reducing costs and they plan to
continue to sustain and enhance their cost advantage. While they believe that their
commercial vehicle business has scale that is competitive in relation to global
standards, with the launch of the Maruti Suzuki Zest, we will be able to benefit from
global economies of scale in the passenger vehicle business as well.
Enhancing capabilities through the adoption of superior processes: Maruti Suzuki
Sons Limited, or Maruti Suzuki Sons, and the entities promoted by Maruti Suzuki
Sons, including Maruti Suzuki, aim at improving the quality of life through leadership
in various sectors of national economic significance. In pursuit of this goal, Maruti
Suzuki Sons and the Maruti Suzuki Sons promoted entities have institutionalized an
approach, called the Maruti Suzuki Business Excellence Model or TBEM, which has
been formulated on the lines of the Malcolm Baldridge National Quality Award to
enable them to drive performance and attain higher levels of efficiency in their
businesses and in discharging social responsibility.
Continuing to invest in technology and technical skills: They believe, they are one of
the most technologically advanced indigenous vehicle manufacturers in India. Over
the years, they have enhanced their technological strengths through extensive
internal research and development activities. Their research and development
resources, which include those at their subsidiaries, like TMETC, TDCV, TTL and
Hispano together with the two advanced engineering and design centres of Jaguar
Land Rover recently acquired, further increase their capabilities in product design,
manufacturing and quality control.



















Porters model of competitive Advantage
A firm's relative position within its industry determines whether a firm's profitability is
above or below the industry average. The fundamental basis of above average
profitability in the long run is sustainable competitive advantage. There are two basic
types of competitive advantage a firm can possess: low cost or differentiation. The
two basic types of competitive advantage combined with the scope of activities for
which a firm seeks to achieve them, lead to three generic strategies for achieving
above average performance in an industry: cost leadership, differentiation, and
focus. The focus strategy has two variants, cost focus and differentiation focus.

Maruti Suzukis uses both differentiation and low cost as generic strategies to try and
gain a competitive advantage over their competitors in the automotive industry. The
market scope that Maruti Suzuki uses is a broad one that encompasses nearly every
type of customer that is in the market to purchase an automobile. Maruti Suzuki is
able to target such a large market because they have something for everyone.
Maruti Suzuki has four wheel drive trucks and SUVs for the outdoor types or those
who live in areas that face severe weather conditions, hybrid models like the Manza
for the eco-friendly customers that are interested in saving the environment, along
with the standard cars for general, everyday use. Additionally, Maruti Suzuki
provides vehicles for all price ranges. From the low price Maruti Suzuki Zest line of
cars to the high priced luxury line of cars and SUVs with Land Rovers, Maruti Suzuki
has something for everyone.
Maruti Suzuki differentiates on several levels form their competitors. First of all,
Maruti Suzuki has been very successful in differentiating on the basis of superior
design and quality. This has led to Maruti Suzuki being able to create a brand image
that is very strong and one that brings to mind quality, long lasting cars when a
potential customer sees it. The strength of Maruti Suzukis brand image has been
seen in recent years with the recalls and problems Maruti Suzuki faced in dealing
with these recalls. Maruti Suzuki was able to survive these problems because they
had such a long and proven track record of quality and superior. Another, area that
Maruti Suzuki differentiates is in technology. Maruti Suzuki was one of the first
Indian successful automobile company to produce the hybrid car on the market when
it released the e-REV. Being the first to get their hybrid on the market allowed Maruti
Suzuki to gain a large portion of the market share in the area of hybrid cars.
Along with differentiation Maruti Suzuki also uses low cost to try and gain a
competitive advantage in the automotive industry. Maruti Suzuki is (or was at the
time) the low cost producer in the industry. Maruti Suzuki achieves its cost
leadership strategy by adopting lean production, careful choice and control of
suppliers, efficient distribution, and low servicing costs from a quality product.
Through research, it is evident that Maruti Suzuki is still the low cost leader in the
automotive industry.























Balance Score Card of Maruti Suzuki
Dr David Norton and Dr Robert Kaplan introduced the Balanced Scorecard (BSC) as
an integrated measurement framework that enables the organisation to align its
performance with strategic objectives. It retains the traditional financial parameters to
measure the firms current performance, but supplements it with learning and growth,
customer and business process metrics that evaluate its long-term improvement
measures.
In BSC implementation, quantifiable metrics are developed based on key business
drivers identified from the strategic plan. Data relevant to these metrics are collected
and made available to various levels of decision-making for analysis. Norton and
Kaplan suggested a step-by-step process for developing the BSC:
Define the scope of measurement: The first step is to identify processes and
structures for measurement - should the scorecard be applied at the business unit
level or the larger corporate level?
Define strategic objectives: The strategic plan is analysed to identify objectives from
each perspective.
Develop strategic measures: Metrics are derived from the objectives, to evaluate
progress in attaining them.
Develop action plan: Systems are designed for linking the strategic measures to
lower-level operational measures, and the BSC is integrated into the organisations
management structure.
The commercial vehicles business unit (CVBU) of Maruti Suzuki was among the first
Asian organisations to be inducted into the prestigious Balanced Scorecard Hall of
Fame, in recognition of its exemplary success with the model. The company is one
of the worlds top 10 truck manufacturers and the CVBU began deployment of
Balanced Scorecard in 2000, in an attempt to remedy years of poor financial
performance. The focus was on achieving a turnaround, and then progressing to
sustainable growth. Within 2 years of implementation, the company began to show
tangible improvement in performance including a 40% growth in revenue.