a summer training report komal

7/28/2019 A Summer Training Report Komal

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ABSTRACTThe first project - REVIEWING THE WHOLE PROCESS OF BUDGET

PREPARATION AND BUDGETARY CONTROL FOLLOWED IN MARUTI SUZUKI

INDIA LIMITED involves the reviewing the whole process of budget preparation and

budgetary control followed in Maruti Suzuki India limited. The budgetary system followed in

Maruti Suzuki India limited is very unique and is based upon a similar system followed in itsparent company from Suzuki Motor Corporation Japan. Annual budgeting exercise for Maruti

Suzuki India limited starts in December every year for next accounting year and gets

finalized by February end. This budgetary process followed by Maruti ensures proper

utilizations of funds by different departments of the company. There are over 350 +

departments in the company. So without effective budgetary control system in place, it would

be impossible for the company to ensure proper utilization of the funds in the company.

The first step of this project is to understand and review how the different departments

prepare their budgets and how the budgeted balance sheet and budgeted profit and loss

account for the whole company is prepared. Every year each department prepares a budget

for their department on the basis of their projected expenses. These budgets are sent to the

budgeting and costing department of the company, which on the basis of these budgets

prepares budgeted balance sheet and budgeted profit and loss account. After preparing

budgeted balance sheet and budgeted profit and loss account, budgeting department presents

these accounts in front of board of directors for their approval.

The second step of this project is to understand and review the process of budgetary control

followed in Maruti Suzuki India limited. In Maruti Suzuki budgetary control and budget

monitoring is a continuous process, which involves monitoring of the budgets of different

departments by comparing the actual expenses of the respective departments with their

projected expenses and finding out reasons for any deviations if any.

The final step of this project is to suggest measures to make this whole process more

effective, less time consuming and error proof.


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TABLE OF CONTENTS

1. INTRODUCTION.......... 82. REVIEW OF

LITERATURE...... 13

3. COMPANY PROFILE............................................................. 154. SWOT ANALYSIS....................................................................... 205. RESEARCH METHOLODOGY................................ 246. OBJECTIVES........................................................................ 29

7. BUDGETS PREPARATION PROCESS FOLLOWED IN MARUTI

SUZUKI 33

8. BUDGETARY CONTROL PROCESS IN MARUTISUZUKI.. 37

9. RATIOANALYSIS 42

10. CONCLUSION..................................................................... 45

11. RECOMMENDATIONS................................................................ 46

12. BIBLIOGRAPHY.......................................................................... 47


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MARUTI SUZUKI INDIA LTD

INTRODUCTION

Maruti Suzuki is one of India's leading automobile manufacturers

and the market leader in the passenger car segment, both in terms of volume of vehicles sold

and revenue earned. It is largely credited for bringing an automobile revolution to India.

Maruti Udyog Limited was established in Feb 1981 through an Act of Parliament, as a

Government company with Suzuki Motor Corporation of Japan holding 26 per cent stake.

The Joint Venture agreement was signed between Government of India and Suzuki Motor

Company (now Suzuki Motor Corporation of Japan) on Oct 1982. Suzuki Motor Company

was chosen from seven prospective partners worldwide. This was because of their undisputed

leadership in small cars and also because of their commitment to actively bring to MUL

contemporary technology and Japanese management practices (which had catapulted Japan

over USA to the status of the top auto manufacturing country in the world).

Maruti Udyog limited was renamed to Maruti Suzuki India Limited (MSIL) on 17

September, 2007.

Until recently, 18.28% share of Maruti Suzuki, a subsidiary of Suzuki Motor

Corporation Japan, was owned by the Indian Government, and 54.2% by Suzuki of Japan. On

May 10, 2007 Govt. of India sold its complete share to Indian financial institutions. With this,

Govt. of India no longer has stake in Maruti Suzuki India limited.

The company went into production in a record time of 13 months and the first car was

rolled out from Maruti Suzuki India Limited Gurgaon in December, 1983.

In 2001, Maruti Suzuki India Ltd became one of the first automobile companies

anywhere in the world to get an ISO 9001:2000 certification. A V Belgium has rated the

companys quality systems and practices as a BENCHMARK FOR THE AUTOMOTIVE

INDUSTRY WORLD-WIDE, global auditors for International Organization for

Standardization.


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management cannot simply consist of having a labour representative on the Board of the

Company. They have faith in the ability of labour to effectively participate in management

and make constructive suggestions. To encourage this, they ensure that there is a thorough

dissemination of information at all levels, through newsletters or via a letter from the Chief

Executive to all employees. Meetings with the Union are held regularly, and programmes

being contemplated by the Company are discussed with the Union. The Sahyog Samiti, a

collection of representatives of non-unionised employees, training programmes in Japan,

Quality Circles, productivity-linked incentive schemes, and an ethos of discipline and

teamwork, all contribute to the Maruti culture.

Several measures of performance have made amply clear that Maruti has established a truly

healthy work culture. They have met all project and performance targets since inception.Their productivity levels are constantly improving. The Company has had good labour

relations with employees from the very beginning, and they have been successful in the

export market. Yet, the Maruti culture is one that does not believe in resting on its laurels.

They adhere to the spirit of Kaizen, which states that constant improvement is always

possible. The most basic tenet of productivity that they hold dear is that " Today should be

better than Yesterday and Tomorrow should be better than Today".


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MANUFACTURING FACILITIES -

Maruti Suzuki have two manufacturing facilities in India, one in Gurgaon and the other in

Manesar, North India.

Gurgaon plant - Maruti Suzuki`s Gurgaon plant houses three fully integrated plants.

While the three plants have a total installed capacity of 350,000 cars per year, several

productivity improvements or shop floor Kaizens over the years have enabled the company to

manufacture nearly 650,000 cars per year at the Gurgaon facilities.

The entire facility is equipped with more than 150 robots, out of which 71 have been

developed in-house. More than 50 per cent of shop floor employees have been trained in

Japan.

Manesar plant - Maruti Suzuki`s Manesar plant has been made to suit Suzuki Motor

Corporation (SMC) and Maruti Suzuki India Limited's (MSIL) global ambitions. It is rated

high among Suzuki's best plants worldwide the plant was inaugurated in February 2007.

.

The plant has several in-built systems and mechanisms to ensure that cars being

manufactured here are of good quality. There is a high degree of automation and robotic

control in the press shop, weld shop and paint shop to carry on manufacturing work with

acute precision and high quality. In particular, areas where manual operations are hazardous

or unsafe have been equipped with robots.

The plant is designed to be flexible: diverse car models can be made here conveniently

owing to automatic tool changers, centralized weld control system and numerical control

machines that ensure high quality. .The plant at Manesar is the company's fourth car assembly plant and has started with

an initial capacity of 100,000 cars per year. This will be scaled up to 300,000 cars per year. A

total investment of Rs 2,500 crore will be made in this car plant by 2010

Diesel engine plant - Suzuki Powertrain India Limited the diesel engine plant at

Manesar is Suzuki & Maruti's first and perhaps the only plant designed to produce world

class diesel engine and transmissions for cars. .


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This plant is under a joint venture company, called Suzuki Powertrain India Limited

(SPIL) in which SMC holds 70 per cent equity with the rest held by Maruti Suzuki.

This facility has an initial capacity to manufacture 100,000 diesel engines a year. This will

be scaled up to 300,000 engines per year by 2010. .

The diesel engines manufactured at this plant will also be exported to SMC companies across

the world. .

This facility, too, has a high level of automation. Final inspection of components is

done through automatic measuring and marking machines, which leads to a uniform and error

free production.

Maruti Suzukis contribution as the engine of

growth of the Indian auto industry, indeed its Impact on

the lifestyle and psyche of an entire generation of

Indian middle class, is widely acknowledged.


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Customer Obsession Fast, Flexible and First Mover Innovation and Creativity Networking and Partnership Openness and Learning

In May 1995, Maruti got ISO 9002 certification. The audit for this covered quality assurance in

production, installation, marketing and sales as well as after sales services. We were also one o

the first companies in the world to pioneer ISO 9000 certification for our dealers.

In October 1993, MUL passed the Conformity Of Production (COP) Audit, which is based


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on a European Union Directive. This authenticated our quality systems and testing facilities for

export to Europe.

Their emphasis on total quality has meant that today they are in a position to guide vendors and

dealers in establishing and consolidating their individual quality systems. This commitment to

quality has ensured a consistently satisfying product and world-class sales and after-sales services.

TS16949:2002 - A new feather was added recently in Marutis cap in the field of quality when

the Quality Management System of its Press Shop & associated functions (collectively termed as

Press Function) got certification for conformance to the requirements of TS16949:2002 standard.

The need for TS certification of Press Function had its genesis in the prestigious project that

Maruti earned for the supply of stamped panels to General Motors India for one of its forthcoming

models.

As a part of Quality system requirements, GM requires all its suppliers to be certified to either

ISO TS 16949 or QS 9000.

These standards address Quality System requirements, which are particularly specific to the

automotive industry and requires an organization to be in compliance with ISO 9000 systems as a

basic requirement. However, whereas QS 9000 would become defunct and cease to exist after Dec

2006, TS 16949 is going to be the standard of the future.

The TS 16949 standard, brought out by ISO in the year 1999, is an extension of the ISO

9001:2000 standard that prescribes Quality management system requirements that are specifically

applicable to the automotive industry.

TS 16949 has gained high popularity and almost all major automobile players across the globe

including GM, Ford, Daimler Chrysler, Nissan, Honda are embracing & promoting it.


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REVIEW OF LITERATURE

BUDGET: A budget is a detailed plan expressed in quantitative terms thatspecifies how an organization will acquire and use resources during a particular period of

time.

In other words a budget is a systematic plan for the efficient utilization of resources. Budget

serves as a benchmark against which actual results can be compared.

What are the Key Purposes of Budget?

Planning: Preparing budgets forces organization to plan ahead. Facilitate Co-ordination: To be effective, each department throughout the organization

must be aware of plans made by other departments.

Allocating Resources: As resources are limited, budget provides one means of allocatingresources among competing uses. So, that resources can be used in a best possible

manner.

Exercising control: Budgets helps in managing financial and operational performance,by comparing actual performance against the planned performance.

In a business organization, a budget represents an estimate of future costs and revenues.

Budgets may be divided into two basic categories:

1) Capital Budgets

2) Revenue Budgets.

Capital budgets are directed towards proposed expenditures for new projects and often

require special financing. For example installing a new plant or expanding the production

capacity.


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Revenue budgets are directed towards achieving short-term operational goals of the

organization, for instance, production or profit goals in a business firm. Operating budgets

may be sub-divided into various departmental of functional budgets.

Budgetary control: No system of planning can be successful without having an effective

and efficient system of control. Budgeting is closely connected with control. The exercise of

control in the organization with the help of budgets is known as budgetary control. The

process of budgetary control includes:

1. Preparation of various budgets. .

2. Continuous comparison of actual performance with budgetary performance. .

3. Revision of budgets in the light of changed circumstances.


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COMPANY

PROFILE


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Maruti Udyog Limited, a subsidiary of Suzuki Motor Corporation of Japan, has been

the leader of the Indian car market for about two decades. Its manufacturing plant, located

some 25 km south of New Delhi in Gurgaon, has an installed capacity of 3,50,000 units per

annum, with a capability to produce about half a million vehicles.

The company has a portfolio of 11 brands, including Maruti 800, Omni, premium

small car Zen, international brands Alto and WagonR, off-roader Gypsy, mid size Esteem,

luxury car Baleno, the MPV, Versa, Swift and Luxury SUV Grand Vitara XL7.

In recent years, Maruti has made major strides towards its goal of becoming Suzuki

Motor Corporation's R and D hub for Asia. It has introduced upgraded versions of Wagon-R

Zen and Esteem, completely designed and styled in-house.

Maruti's contribution as the engine of growth of the Indian auto industry, indeed its impact on

the lifestyle and psyche of an entire generation of Indian middle class, is widely

acknowledged. Its emotional connect with the customer continues

Maruti tops customer satisfaction again for sixth year in a row according to the J.D.

Power Asia Pacific 2005 India Customer Satisfaction Index (CSI) Study.

The company has also ranked highest in India Sales Satisfaction Study.

The company's quality systems and practices have been rated as a "benchmark for the

automotive industry world-wide" by A V Belgium, global auditors for International

Organisation for Standardisation.

In keeping with its leadership position, Maruti supports safe driving and traffic

management through mass media messages and a state-of-the art driving training and

research institute that it manages for the Delhi Government.

The company's service businesses including sale and purchase of pre owned cars

(TrueValue), lease and fleet management service for corporates (N2N), Maruti Insurance and

Maruti Finance are now fully operational.. These initiatives, besides providing total mobility

solutions to customers in a convenient and transparent manner, have helped improve

economic viability of The company's dealerships.

The company is listed on Bombay Stock Exchange and National Stock Exchange.


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OBJ ECTIVES

Modernization of the Indian Automobile Industry. Production of fuel-efficient vehicles to conserve scarce resources. Production of large number of motor vehicles which was necessary for economic growth. Marutis marketing objective is to continually offer the customer new products and

services that:

Reduce the customers cost of ownership of their cars; and Anticipate and address the customers needs and preferences in all aspects and

stages of car ownership, to provide what they refer to athe 360 degree

customer experience.

A Maruti 800

A OMNI

B Zen

B Wagon R

B Alto

C Esteem


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They sell ten models with more than 50 variants in segments A, B, C, and utility

vehicle segment of the Indian passenger car market. Of these, they manufacture nine

models and import the Grand Vitara as a completely built unit from Suzuki in Japan.

Their models and variants are designed to address the changing demands of the market

and are per

iodically upgraded in technology, styling and features. To take advantage of the brand

recognition associated with their products, they retain the brand name of the product

through various stages of product upgrades over time. For example, the version of the

Maruti 800 brand currently sold in the market is a significantly upgraded version, in

terms of technology, design and styling, of the Maruti 800 launched in 1983.

C Baleno

C Versa

C SWIFT

Utility Vehicle GYPSY KING

Utility Vehicle GRAND VITARA


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BOARD OF DIRECTORS:

Mr Shinzo Nakanishi, Chairman Mr Jagdish Khattar, Managing Director Mr Hirofumi Nagao, Joint Managing Director Mr Shinichi Takeuchi, Joint Managing Director Mr Osamu Suzuki, Director Mr R C Bhargava, Director Dr. Surajit Mitra, Director Mr Kumar Mangalam Birla, Director Mr. Amal Ganguli, Director Ms Pallavi Shroff, Director Mr Manvinder Singh Banga, Director


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Profile of Products


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EXPORTS OF MARUTI SUZUKI INDIA

LIMITED

In March 2007 Maruti Suzuki India limited crossed cumulative export figure of

450,000 vehicles since its first export in 1986. It is Indias largest passenger car manufacturer

and has a global presence with a well established network in several countries across Asia,

Europe, Africa, South and Latin America. Europe has been the largest market with exports of

over 280000 units. Even in the highly developed markets of Netherlands, UK, Germany,

France & Italy, Maruti vehicle have made a mark. The top ten destinations of the cumulative

exports have been Netherlands, Italy, U.K., Germany, Algeria, Chile, Hungary, Sri Lanka,

Nepal and Denmark in that order.

Maruti has also entered some unconventional markets like Angola, Benin, Djibouti,

Ethiopia, Morocco, Uganda, Algeria, Egypt, Chile, Costa Rica and El Salvador and witnessedsizeable growth. The Middle-East region has also opened up and is showing good potential

for growth. Some markets in this region where Maruti has a good presence are Saudi Arabia,

Jordan, Kuwait, Bahrain, Qatar and UAE. In Europe the number of units sold is 280000 in 34

countries, in Africa it is 45000units, in Latin America it is 29000units and Oceania the

number of units sold is 6300units.


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CONTINENT WISE EXPORTS OF MARUTI

SUZUKI SINCE ITS INCEPTION

PRODUCT PORTFOLIOThe company has a product portfolio of 11

brands with over 100 variants, including - Maruti 800, Omni, Alto, WagonR, Swift, Zen

Estilo, Gypsy, DZire ,Versa, SX4, Ritz, A-Star and Grand Vitara.

Three Maruti Suzuki`s cars namely Maruti Zen Estilo, Maruti Swift and Maruti SX4 walked

away with 2007- India Automotive Performance, Execution and Layout Study (APEAL)

Award in their respective categories. .

In 2007 Initial Quality Study also, Maruti Swift walked away with the highest IQS in the

Premium Compact car segment.

64%

15%

10%

9%2%

EUROPE

ASIA

AFRICA

AMERICA

OCEANIA
http://www.maruti800.com/http://www.marutiomni.com/http://www.marutialto.com/http://www.marutiwagonr.com/http://www.marutiswift.com/http://www.marutizen.com/http://www.marutigypsy.com/http://www.marutidzire.com/http://www.marutiversa.com/http://www.marutisx4.com/http://www.grandvitaraindia.com/http://www.grandvitaraindia.com/http://www.marutisx4.com/http://www.marutiversa.com/http://www.marutidzire.com/http://www.marutigypsy.com/http://www.marutizen.com/http://www.marutiswift.com/http://www.marutiwagonr.com/http://www.marutialto.com/http://www.marutiomni.com/http://www.maruti800.com/


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ACCOLADES 2010-2011

Maruti Suzuki was ranked first in customer satisfaction in an annual survey conducted byJD Power for the seventh time in a row.

The company was ranked first in India for sales satisfaction for the third time in a row byJD Power Asia Pacific.

The company won the Avaya Global Connect Customer Responsiveness award 2006. The company was ranked 91among world`s most reputed companies reported by Forbes

magazine. Among automobile players, it ranked 5th in the world, ahead of many global

giants. Business World ranked Maruti as Indias most respected automobile company. Business today listed the company among Indias 10 best marketers. Maruti Suzuki won the Asia Pacific PLM excellence award for 2006 from UGC Corp,

leading global provider of product life cycle management (PLM) software and services.

TNS Automotive ranked Maruti Suzuki first for Corporate Social Responsibility. Manesar car assembly plant is ranked amongst the top two Japanese subsidiaries

overseas, by Nikkei (Nihon Keizai Shimbun), for the year 2007.


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ORGANISATIONAL STRUCTURE

.

Maruti Suzuki has a multi-tier management structure, comprising a Board of Directors at the

top, followed by five business vertical heads reporting to the Managing Director. Thebusiness

verticals of the Company are Marketing & Sales, Engineering, Production, Administration

and Supply Chain. For more information on the organisational structure and the leadership

team of Maruti


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SWOT ANALYSIS OF MARUTI SUZUKI

MAJOR STRENGHTS OF MARUTI SUZUKI INDIA LIMITED

1) LOW LABOR COST - Maruti Suzuki India limited is operating in a country in which

cost of labor is very low as compared to other developing and developed countries. This

is a major strength for Maruti Suzuki.

2) STRONG DISTRIBUTION AND SERVICE NETWORK - Maruti Suzuki has the

largest Distribution and Service Network in India

600 showrooms covering 393 cities 150 rural format sales outlets in 143 cities 620 dealer service stations &1900 Maruti Authorized Service Stations

Over 1190 cities covered by Service Network

3) STRONG PRODUCT PORTFOLIO - Maruti Suzuki has a large and strong product

portfolio -

Maruti Suzukis overall portfolio consists of 11 basic models & over 150 variantsspanning across all segments of the industry.

It has widest product range in India

Majority of new showrooms & workshops coming from existing dealers

Maruti Suzuki is Present in Gasoline, Diesel and LPG

6 models launched in last 30 months including Swift Diesel & Wagon R Duo.


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4) EXCLUSIVE TIE UPS WITH AUTO FINANCE COMPANIES - In India, a large

proportion of cars about 75% are sold via finance. Company`s exclusive tie ups with

financers helps the customers to get their vehicles financed easily.

MAJOR WEAKNESSES FOR MARUTI SUZUKI INDIA LIMITED -

Perceive Low interior quality inside the cars when compared to quality players likeHyundai and other new foreign players like Volkswagen,Nissan etc.

Government intervention due to having share in MUL. Younger generations started getting a great affinity towards new foreign brands The management and the companys labor unions are not in good terms. The recent

strikes of the employees have slowed down production and in turn affecting sales.

Maruti hasnt proved itself in SUV segment like other players.d as entry level caronly

MAJOR OPPURTINITIES FOR MARUTI SUZUKI INDIA LIMITED -

1) India is among the few countries that are showing a growth rate of 30% in demand for

passenger cars as domestic automobile market is growing at a high rate. Automobile

industry expert predicts that by 2050 every sixth car in the world will be for Indians

2) There are about 700 million vehicles on road in the world today. It is estimated that this

vehicle population would grow to about 1.3 billion in the year 2030. Most of this

increase of 600 million will come from developing countries. These markets will

look for low-cost automobiles. India has the opportunity to meet this need.

And, in the process create a huge export market. This presents a major opportunity for

Maruti Suzuki as it is a major player in Indian automobile sector.

3) By 2010, India is expected to witness over Rs 30,000 crore of investment.

4) According to estimation the compound annual growth rate (CAGR) of Indian automobile

sales will grow at 9.5% and will touch a mark of 13,008 million by 2010.


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5) About 77 % of the Indian automobile sector is still owned by 2 wheeler manufacturers,

which can be a potential market for small car manufacturers.

6) Maruti Suzuki believes that there are millions of Indians who can afford a car but for

various reasons are not buying one. With focused marketing efforts, many of these

people can be persuaded to buy a car. This is a major opportunity for the company. The

company also took several initiatives like Special Schemes for certain sections of society

like government employees etc., Employee referral scheme where each employee was

veiled as sales man. Dealer and vendor scheme are some other examples of these

initiatives.


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7)

The above graph shows the positive correlation between GDP and the no. of cars per 1000

people. GDP of India is growing at a very healthy rate and is expected to grow between 6 to 8%. Indias fast paced GDP growth and pent up demand are expected to fuel growth in

automotive sales. This presents a great opportunity for automobile manufacturers.

8) Low car penetration, about 8 cars per 1000 Population in India.

9) By 2020 more than half of Indias population is expected to live in urban areas this will

bring about a dramatic growth in demand of passenger cars.

10) Indian rural market is on the verge of opening up, this will present a huge growth

opportunity for automobiles manufacturers.


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MAJOR THREATS FOR MARUTI SUZUKI INDIA LIMITED -

1) TATA`S one lakh carNANO is a big threat to Maruti Suzuki as Maruti Suzuki is asmall car manufacturing company and its smallest and cheapest car Maruti 800 is of

approx 2 lakhs . Maruti 800 is also the smallest and cheapest car in India right now.

After the final launch of TATA`S NANO it will become the cheapest car in the Indian

automobile sector

2) Wage rates in India are increasing at a very fast pace, this can be a potential threat tothe company.

3) MUL recently faced a decline in market share from its 50.09% to 48.09 % in theprevious year(2011)

4) Major players like Maruti Suzuki, Hyundai, Tata has lost its market share due to manysmall players like Volkswagen- polo. Ford has shown a considerable increase in

market share due to its Figo.

5) Tata Motors recent launches like Nano 2012, Indigo e-cs are imposing major threatsto its respective competitors segment

6) China may give a good competition as they are also planning to enter into Indian carsegment

7) Launch of Hyundais H800 may result in the decline of Alto sales


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RESEARCH METHODOLOGY

RESEARCH DESIGN

The research method selected for the study is a combination of a survey and an industrial

study. The survey research method is described here under that:

(i) It is a design in which primary data is gathered from members of the sample that represents a

specific population

(ii) It is a design in which a structure and systematic research instrument like a questionnaire or

an interview schedule is utilized together with the primary data

(ii) It is a method in which the researcher manipulates no explanatory variables because they

have already occurred and so they cannot be manipulated

(iii) Data are got directly from the subjects .The subjects give the data in the natural settings of

their workplaces

Interview

The method of communication of the research instrument is by means of the personal

interview. The method has the merit that it produces a better sample of the population than

either mail or the telephone methods. It also has the merit that it gives a very high completion

and response rates. It has the merit that the interview has a bigger sensitively

misunderstandings by the respondents and gives a chance for clarification of misunderstood

questions. It has the merit that it is a very feasible method . The personal interview method

has the demerit that it is more costly than the mail or the telephone methods of

communication of a questionnaire.


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Observations

In addition to questionnaire and face-to face interviews, observation was also carried out.

This was to enable the researcher to witness by the officers of this firm and to interact with

these people.

Secondary data:

(1) Annual reports

(2) Company databases

(3) Auto journals

(4) Industry analysis reports

(5) Company websites

(6) Marketing times Maruti Suzuki dealer

Limitation of The Study

Research work is subject to one form of limitation or the other, mine is not an exemption.

1. It was the initial thought that the exercise was easy but the contrary was the case. Asa student, several academic demands compete with the limited but precious time

available.

2. This implies that none of the competing exercise could be effectively handled withoutthe others being worse off.

3. This was my situation. Although the time expended was too small to do justice to thestudy. The opportunity cost in terms of other equally important activities forgone or

cursorily attended to, was made.

4. The researcher faces some embarrassment arising from low-level educated staff whocould not understand the essence of the research work as this.

5. Current budget of the company could not be studied due to the confidential nature ofthe data.


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OBJECTIVES

1) Maruti is a multinational company & is globally known for its automobiles & due toits well known reputation in the market I a finance student has chosen to study the

BUDGET PREPARATION & BUDGETARY CONTROL of the company.

2) To gain experience & knowledge that how a company prepares budget & control it.3) The budget forms a base for a companys operations & working.

Marutis marketing objective is to continually offer the customer new products and services that:

Reduce the customers cost of ownership of their cars; and ess the customers needs and preferences in all aspects and stages of car

ownership, to provide what they refer to as the 360 degree customer experience.

They sell ten models with more than 50 variants in segments A, B, C, and utility vehicle segment of

the Indian passenger car market. Of these, they manufacture nine models and import the Grand Vitara

as a completely built unit from Suzuki in Japan. Their models and variants are designed to address the

changing demands of the market and are periodically upgraded in technology, styling and features. To

take advantage of the brand recognition associated with their products, they retain the brand name ofthe product through various stages of product upgrades over time. For example, the version of the

Maruti 800 brand currently sold in the market is a significantly upgraded version, in terms of

technology, design and styling, of the Maruti 800 launched in 1983.


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Budget preparation process followed in MARUTI SUZUKI

INDIA LIMITED

Production / sales target finalized

by top management

Detailed

production plan

Sales budget

From M&S

Domesticsales

Export sales Spare parts

Manpower

budget

Revenue

expenditure

budget from

departments

Indigenization

plan

Capital

investment

plan

Material cost budget

Importedcomponents

Indigenouscomponents

Raw materials Paints and direct

consumables

Discussion between finance

& other departments

Preparation of model wise

and month wise unit standard

statement and consolidation

Consolidation of

divisional budget

Consolidation of divisional

budget to company budget

Preparation of draft cash

budget and profit & loss a/c


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NO

YES

This chart shows the unique process of budget preparation followed in Maruti Suzuki,

which is based upon a similar process followed in its parent company Suzuki Motor

Corporation Japan.

Annual Budgeting exercise in Maruti Suzuki starts from December and gets finalized

during February. Every year top management decides the total number of cars to be sold or

produced on the basis of past trends, industry growth rate, feedback from marketing and

selling department and various other factors which effect the demand of cars. On the basis of

the number of cars to be produced, a detailed production plan is prepared. This production

plan indicates the resources required to produce the desired number of cars. On the basis this

production plan every department plans their expected requirements of funds for the next

Budget presentation by divisional

heads to MD & directors.

Budgetary targets for each

division set b directors.

Whether

budget

target

acceptable?

REVIEW

Preparation of cash

budget, projected profit &

loss a/c and balance sheet


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financial year. These departments enter their respective requirements of funds in an online

form sent by finance department, on a monthly basis along with the purpose for which funds

are required. When the save button on this form is clicked this data gets stored in a central

database. Similar expenses of all the departments are stored in one place for example training

expenses of all the departments are stored in one and stationary expenses of all the

departments are saved in one database. Budgeting department prepares a master budget on

the basis of these databases, which represents an overall plan of the organization. Annual

Budget is divided into quarterly budgets i.e. Q1, Q2, Q3 and Q4.

Budget for Q3 and Q4 is revised based on actual expenditure up to July and expected

trends for the remaining year. This exercise starts on July and revised budget is finalized by

August.

Budgeting department also prepares projected profit & loss account and balance sheet

of the company. This projected profit & loss account and balance sheet is presented before

board of directors for their approval. If the Board of directors are satisfied with the expected

profit and sales, then the budget is approved if not then the respective departments are told to

reduce their budget and the whole process is repeated.

Zero-based budgetingIn Maruti Suzuki, a zero based budgeting (ZBB) system is

followed. ZBB is a top-down budgeting system where resource allocation decisions are made

through a function-by-function assessment. No function is assumed to be necessary. The

criteria for evaluation are passed down from higher levels, enhanced and made more

appropriate for each area as the criteria are passed down to office and department heads.

Department and office heads develop justifications within these evaluation guidelines for

each function and justifications for increased resources. These pass back up through the

organization with each level setting priorities for resource allocations to individual functions

from the levels below.


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Budgetary control process followed in MARUTI SUZUKI INDIA

LIMITED

Maruti Suzuki follows a unique process of budgetary control, which ensures proper

utilizations of funds by different departments of the company. There are over 350 +

departments in the company. So without effective budgetary control system in place, it would

be impossible for the company to ensure proper utilization of the funds in the company.

Monitoring of the budget is done on the monthly basis by budgeting department, in which it

compares the actual expenses of the respective departments with the projected expenses and

finds out reasons for any deviations if any and presents the report to the board of the directors

at the beginning of each month.

Budget controlling is done on a quarterly basis at Maruti Suzuki India limited. For effective

control of the funds all the expenses are divided into 3 categories, according to their relative

importance.

A category expenses are very tightly controlled and monitored because of their relative high

degree of controllability. For example- Consultancy fees, Gifts, Seminar / Conference Exp,

etc.

B category expenses are less closely monitored and controlled, because of their low degree of

controllability B category expenses can be controlled to a extent only. For example Travel,

Journals, Stationary, Phone, Conveyance, etc. and no control is exercised over C i.e. Their

payment is not stopped even they shoot over their budget but for A and B category expenses

payment is allowed to the level of budget approved.

A Category Items of similar nature are grouped together (have same first 5 digit a/c code),

and control is exercised over the group budget. Budget control exists at a parent level or 5

digit account code level.


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For example-

A-P2110701-COMPUTER CONSUMABLES

A-P2110702- SOFTWARE PURCHASE EXPENSES

A-P2110703- SOFTWARE DEVELOPMENT EXPENSES

A-P21107- SOFTWARE RELATED EXPENSES

Account Budget Actual Balance

A-P21229 01 500,000 500,000

A-P2122902 100,000 400,000 (300,000)

A-P2122903 200,000 (200,000)

Total 600,000 600,000 Nil

These A category expenses are monitored or controlled at 5 digit code (A-P21229) and not at

individual 7 digit item code level ie 2122901, which basically means that respective

department cannot spend more on SOFTWARE RELATED EXPENSES then the budgeted

amount but it can spend the whole amount on any of its components.

B category expenses are general expenses and are monitored at cost center level i.e. expenses

related to a particular department.

For example


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B-P2111501- SNACKS EXPENSES

B-P2111501-LUNCH EXPENSES

B-P21115- SNACKS EXPENSES

B-P2113201-POSTAL STAMPS

B-P2113202-POSTAL EXPENSES

B-P2113203-COURIER CHARGES

B-P21132-POSTAL EXPENSES

Account Budget Actual Balance

B-P2123401 50,000 5,000 45,000

B-P2123402 40,000 40,000

B-P2145665 40,000 (40,000)

B-P2645872 45,000 (45,000)

Total 90,000 90,000 Nil

These B category expenses are monitored and controlled at a cost center or departmental

level which means that expenses are not monitored on B-P21234-POSTAL EXPENSES or

B-P21115- SNACKS EXPENSES level but on total of all these expenses of that particular

department. For example in the above table expenses will not be monitored at individual

account code level but at a departmental level.


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Maruti Suzuki India limited is using a financial module of Oracle for its financial function.

Special codes are assigned to all the entries that come in profit & loss account and balance

sheet (7 digit code), cost centers (every department is a cost center) 4 digit code and

companies (2 digit code). Booking of expenses can only be done by entering specific codes.

My project in maruti Suzuki India limited involves understanding and analyzing this whole

process and to suggest ways to make this unique process more effective and free from any

faults.


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Appendix1

RATIO CALCULATION OF MARUTI SUZUKIRS. IN MILLIONS

PARTICULARS

2008-2009 2007-2008 2006-2007

LIQUIDITY RATIOS

Current assets 38,459 37,496 29,720

Current liabilities 25,015 19,771 16,080

CURRENT RATI O =Current assets / Current liabilities 1.54 (times) 1.90 (times) 1.85

(times)

Current assets 38,459 37,496 29,720

Lessinventories 7,132 8,812 6,666

Liquid assets 31,327 28,684 23,054

Current liabilities 25,015 19,771 16,080

ACID TEST RATIO =

LIQUID ASSETS

CURRENT LIABILITIES

1.25 1.45 1.43

ACTIVITY RATIOS

Average assets =

Op. balance + Cl.. Balance

2

88,665 69,962 60,031.5

Gross sales 171,442 147,043 132,914

ASSET TURNOVER RATI O =

1.93 2.10 2.21


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SALES

AVERAGE ASSETS

Cost of goods sold 12,9349 107110 99966

Average inventory 7972 7739 5532INVENTORY TURNOVER RATIO 16.22 13.84 18.07

LEVERAGE RATIOS

Total debt 32998 21354 20256

Equity 68539 54526 43788

DEBT EQUITY RATIO 0.48 0.39 0.46

Total debt 32998 21267 20256

Total assets 101537 75793 64044

DEBT-ASSET RATIO 0.32 0.28 0.32

Earnings before interest and taxes 23174 17704 13409

PROFITABILITY RATIOS

Gross profit 32913 22404 19585

Net sales 145,922 120,034 109108

GROSS PROFIT MARGIN RATIO 22.55 % 18.66 % 17.95 %

Net profit 15,620 11,891 8,536


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Net sales 145,922 120,034 109108

NET PROFIT MARGIN RATIO 10.70 % 9.90 % 7.82 %

Net income (profit after tax) 15,620 11,891 8,536

Number of outstanding shares 288.910000 288.910000 288.91000

0

EARNING PER SHARE =

NET NCOME (PROFIT AFTER TAX)

NUMBER OF OUTSTANDING SHARES

54.065 41.16 29.54

Net income 15,620 11,891 8,536

Equity Capital 68539 54526 43788

RETURN ON EQUITY =

NET INCOME

AVERAGE EQUITY

22.79 % 21.81 % 19.49 %

DIVIDEND PER SHARE 4.5 3.5 2

EARNING PER SHARE 54.065 41.16 29.54

DIVIDEND PAY OUT RATIO =

DIVIDEND PER SHARE

EARNING PER SHARE

8.32 % 8.50 % 6.77 %

DIVIDEND PER SHARE 4.5 3.5 2

MARKET PRICE PER SHARE 865.40 577.22 426.32

DIVIDEND YIELD =

DIVIDEND PER SHARE

MARKET PRICE PER SHARE

0.52 % 0.61 % 0.47%

EXPENSES TO NET SALES RATIOS

Consumption of raw material 108630 94247 86502


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Net sales 145,922 120,034 109108

CONSUMPTION OF RAW MATERIAL TO NET SALES 74.44% 78.52% 79.28%

Employees remuneration and benefits 2,884 2,287 1,960

Net sales 145,922 120,034 109108

EMPLOYEER REMUNERATION AND BENEFITS TO

NET SALES

1.98 % 1.91 % 1.80 %

Selling and distribution expenses 4,999 3,560 3,699

Net sales 145,922 120,034 109108

SELLING AND DISTIBUTION EXPENSES TO NET

SALES RATIO

3.42 % 2.97 % 3.39 %

Interest expenses 376 204 360

Net sales 145,922 120,034 109108

INTEREST EXPENSES TO NET SALES RATIO 0.26 % 0.17 % 0.33 %

Depreciation 2,714 2,854 4,568

Net sales 145,922 120,034 109108

DEPRECIATION TO NET SALES 1.86 % 2.38 % 4.19 %


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CONCLUSION

When summarizing the financial results of MARUTI UDYOG LIMITED. I have observed

that their working is quite reasonable financial. It is very good company. There are no any

debts of long term liabilities of the company. To conclude, from of the overall analysis of

financial management of the company, I can say that it is financial sound and well managed

three consecutive years shows and applauding position. I was also able to well understand

my financial concepts.

The formal budgeting system has the following major benefits.

1. Budgeting due to its formal time table or schedule compels managers to think ahead apart

from taking care of their current activities.

2. Budgeting, due to its approval and authorization by the superiors, provides definite

expectations that are the best framework for judging subsequent performance.

3. Budgeting helps in coordinating the various departments of the organization. The budget

harmonizes the goals (objectives) of the individual departments into the organization wide

goals (objectives).

RECOMMENDATION

We need to know that many financial reporting frauds have their genesis in overly optimistic

budgets that subsequently lead to an environment of "cooking the books" to reach unrealistic

goals. These events usually start small, with the expectation that time will make up for a

temporary problem. To maintain organizational integrity, senior-level managers need to be

careful to provide realistic budget directives. Lower-level managers need to be truthful in

reporting "bad news" relative to performance against a budget, even if they find fault with the

budget guidelines.


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BIBLIOGRAPHY

(1) Annual reports

(2) Company databases

(3) Auto journals

(4) Industry analysis reports

(5) Company websites

(6) Articles published by Society of Indian Automobile Manufacturers

(7) www.siam.in

(8) www.ibef.org

a summer training report komal

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