Suzuki Myanmar Motor Company Case Study - Business Assignment Help

Assignment Task:

SUZUKI MYANMAR MOTOR COMPANY

Suzuki Myanmar Motor Company launched its latest generation Suzuki Swift in the country in October, 2019.  The new Suzuki Swift is the Japanese car maker’s global flagship compact car and the third generation of the model which was assembled locally under the semi-knocked-down system.

Since 1998, Suzuki has operated a factory in South Dagon Township, Yangon.  Earlier this year, it opened a second, larger plant at the Thilawa Special Economic Zone (SEZ).  ‘’We are producing the Suzuki Swift in our new factory in Thilawa, along with other popular Suzuki models like the Ciaz and Ertiga,” said Mr. Keiichi Asano, managing director of Suzuki Myanmar.

Myanmar Economy and Automobile Industry

The Myanmar economy is projected to grow by 6.6 percent in 2020, according to the World Bank, a tad higher than its 6.5 percent projection for this year.  Economic growth is expected to further increase to 6.7 percent in 2021 and 6.8 percent in 2022. 

According to the annual World Bank East Asia and Pacific Economic Update, growth in 2020 will be driven by investments in the manufacturing, insurance and construction sectors and supported by market reforms. 

In automobile manufacturing sector, Myanmar has begun squeezing auto imports in an attempt to encourage carmakers to invest in the country, as the government seizes on the industry's potential to create jobs.  Imported pickups face a special registration fee of up to 40% of their import price. Locally produced cars are not subject to these fees and instead receive tax exemptions.

The government also has gradually restricted the import of right-hand-drive vehicles, a move that has more than halved the once popular imports of used Japanese cars.

Recently, car makers in Myanmar have been increasing production of locally assembled automobiles in response to higher demand.  Suzuki Myanmar Motor this year produced 15,000 vehicles compared to 12,000 in 2018, representing a 25 percent increase in year-on-year production, the company said.

“We are more producing more brand new motors based on our factory capacity in Thilawa this year and now command 60 percent of the market for new cars in Myanmar,” said Mr. Keiichi Asano, Managing Director of Suzuki Myanmar.

But Fitch Solutions, a market research company, warned in a report dated October 4 that the sector’s potential for growth may be hampered by Myanmar’s underdeveloped banking system. Poor consumer access to credit, it said would be an “ongoing barrier to greater vehicle ownership.”

The research firm added that Myanmar’s limited road network coverage will deter potential consumers from purchasing more vehicles.  “We forecast Myanmar’s vehicle ownership rate to reach just 26.5 vehicles per 1000 of the population by the end 2019, much lower than Thailand, which will surpass 290 vehicles per 1000 of its population over the same period,” it said.

Nevertheless, Suzuki Myanmar's Mr. Asano said that the firm expects to increase production in the future as market demand and competition from other car makers increases.  In 2018, more than 18,000 new vehicles were sold in Myanmar, which is 2.1 times more than the previous year’s sales, according to available data.  By 2020, automakers estimate that the number of vehicles driven in Myanmar will exceed 2 million.

Toyota Motor Corporation (Toyota) is already establishing its first vehicle production company in Thilawa SEZ, where it will produce the Toyota Hilux by February 2021. 

Toyota currently sells the Hilux, Vios, Rush, and other vehicles in Myanmar by relying on imports. Its new US$53 million facility will allow it to assemble around 2500 Hilux vehicles using the semi knock-down method.

Suzuki's Segmentation and Targeting 

With its new factory up and running, Suzuki hopes to sell 400 to 500 units of the new Swift per month. The company is planning to market its latest model to young working professionals.

‘’Our target group for the new Swift is a very wide range of customers including young professionals who are buying their first car and aged from 20 to 35. I’m confident that the Swift will create a level of demand in the Myanmar automobile market,” Mr. Asano added.

It will also help set a higher standard for car ownership in the country. “In the past, Myanmar could import second hand cars from Japan. But now we can sell brand new vehicles here and we have seen demand rising. This signifies a step forward for the Myanmar economy,” said Mr. Takayuki Sugiyama, general manager of Suzuki Motor Corporation’s Asia Automobile Division.

The Marketing Mix

Suzuki Myanmar's main products in passenger car segment are Ciaz, Ertiga and Swift.  The new Swift will be available in two grades, GL and GLX. The GL grade will cost 19,900,000 MMK.  Buyers need to pay 2.9 million MMK as income tax. The model will be available in red and pearl colors.  As the Suzuki Swift is produced in a Myanmar factory, buyers will be able to register under Yangon license plates.

Meanwhile, the GLX grade will set buyers back by 22,900,000 MMK, excluding registration fees and income tax, which will amount to 3.4 million MMK. Buyers can choose between red, pearl or black color models.

The company also launched new-generation All New 7-seater Ertiga 2019 MPV in April, 2019.  The new Ertiga model is priced at 27.2 million MMK.  Built on the new-generation HEARTECT platform, All New Suzuki Ertiga 2019 is more spacious and has an upgraded engine capacity.  The new Ertiga comes in three colors – Pearl Snow White, Prime Cool Black and Pearl Glorious Brown.  Magma Gray will be available in October 2019, and the car can also be reportedly purchased by a 7-year installment plan.

In promoting its passenger cars, Suzuki Myanmar has also tied up with AYA Bank to offer a 7-year auto loan program to help prospective customers better afford a new Suzuki car.  Under the ‘AYA Super Suzuki Finance’ program, customers can place a 20 percent down payment for a 5-year loan and 25 percent down payment for a 7-year loan.  Service charges and sales commissions will be waived on the buyers’ side.

The new Swift will be available in Suzuki showrooms nationwide starting October 15.  In terms of distribution channels, Suzuki Myanmar has successfully established 39 Suzuki showrooms and service centers nationwide.  Suzuki has also set up a spare parts delivery service at an affordable cost.

Suzuki is producing cars in Myanmar to match global standards.  It now employs 100 workers at its South Dagon factory, which is now producing carry trucks.  At the Thilawa factory, Suzuki Myanmar is assembling the Ciaz, Ertiga and Swift models with 200 workers.

‘’We have successfully produced brand new cars in Myanmar which proves that the government favors this sector in the development of Myanmar economy. Since 1998 up to now, Suzuki has invested a total of US$60 million in Myanmar and will continue to invest in Thilawa SEZ,” said Mr Sugiyama.

The success of Suzuki Myanmar will depends on how well the company responses the changes in its external environment as well as its internal marketing strategies. 

CASE QUESTIONS

Answer all the questions below.  Each question is worth 20 points.

1. Analyze the macro-environmental factors which affect Suzuki Myanmar's business and marketing activities?  How should the company response these impacts?

2. Provide a SWOT analysis for the Suzuki Myanmar. 

3. How can Suzuki Myanmar segment automobile market in Myanmar?  Analyze the company's targeting, positioning and differentiation strategies.

4. Explain Suzuki Myanmar's Product Mix.  Does their product mix create values to its customers and buyers? Why or why not?

5. COVID-19 pandemic has significant impact to Myanmar economy, Suzuki Myanmar, their customers (distributors) and consumers.  Recommend growth strategy options to Suzuki Myanmar, particularly for during- and post-COVID-19 period, along with your supporting reasons.

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