CLCB/064

IBS Center for Management Research

Rendezvous with RITZ: Dilemma of Buying the Right Car

This caselet was written by Gajulapally Radha Krishna, IBS Hyderabad. It was prepared from generalized experience, and is
intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of a
management situation.

©2010, IBS Center for Management Research. All rights reserved.

To order copies, call +91-08417-236667/68 or write to IBS Center for Management Research (ICMR), IFHE Campus, Donthanapally,
Sankarapally Road, Hyderabad 501 504, Andhra Pradesh, India or email: info@icmrindia.org

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 CLCB/064

Rendezvous with RITZ:

Dilemma of Buying the Right Car
Madhavan Raj (Madhavan), a professor in an engineering college, had recently upgraded to a new
and more spacious car. He had spent a lot of time researching the various cars in that range before
zeroing in on the Maruti Suzuki Ritz. However, barely a few months after the purchase, there was
a drop in the price of the model he had bought. Madhavan then began to wonder whether he had
made the right choice.

MADHAVAN AND HIS OLD CAR

Madhavan, 45, was a professor in a University Engineering college in Hyderabad, India. His
family consisted of his wife, two children aged 15 and 10, and his parents aged 88 (father) and 85
(mother). He travelled around 80 km daily to reach his college. He had a car pool arrangement
with two other colleagues of his – Shyam Rastogi (Rastogi), 42, and Alok Gupta (Gupta), 35.
These three professors owned three different models of cars. While Rastogi owned a Hyundai
Santro Xing which was 10 years old, Gupta had a Maruti Suzuki Zen Estillo which was two years
old. Madhavan owned a Maruti Alto which he had bought more than two years ago. He had bought
the car in 2007. The salesperson arranged for a 90% loan and he had to pay equated month
instalments (EMI). The EMI was for five years at an interest rate of 10.5% and the amount came to
Rs. 7,705.
Alto was a good car in terms of mileage, maneuvring, and maintenance but after around two years
of driving the car, Madhavan felt that he would like a change. Moreover, he was heavily built and
traveling such a long distance by the car had left him with a lower back pain. The Alto‘s low seats
made driving uncomfortable for him and he wondered whether the people traveling with him too
found the limited space and the low seats a constraint. When he had bought the car he hadn‘t
known how to drive and had used the public transport for conveyance. He had bought the car then
more out of social pressure than for its utility.

THE TRIGGER

In 2009, Madhavan and his colleagues got a generous salary hike as well as a promotion. Soon
after, Rastogi wanted to change his car since it was 10 years old. He was a meticulous person and
did thorough research before buying any product. He was good at negotiating with salespersons
too. Gupta, on the other hand, was not as meticulous as Rastogi but had good knowledge about car
models, specifications, designs, etc.
Rastogi browsed various websites and to collect more information, visited the showrooms of
Hyundai, Fiat, and Maruti Suzuki. He went through the features and specifications of all cars.
After a test drive, he finally decided to buy the Maruti Suzuki Ritz. He asked Madhavan for his
opinion. After test driving the car, Madhavan found it to very spacious and comfortable and also
liked it.

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 Rendezvous with RITZ: Dilemma of Buying the Right Car

All the three colleagues started travelling by Rastogi‘s new car. While travelling in the Ritz,
Madhavan subconsciously started evaluating the comfort of the car and comparing it with the Alto.
It was then that he began to contemplate changing his own car.
However, Madhavan could not take a decision on purchasing a new car immediately. He had to
discuss the matter with his wife.. He also wanted to consult his parents before deciding on the
brand and model he wanted to buy. Most importantly, he had to think about the budget also. It was
going to be a slow process since he was not very knowledgeable about the new cars in the market
or their features.
Since the first priority was to arrange the finance for the purchase, Madhavan estimated the worth
of his Alto which was two and a half years old (March 2007–November 2009). He needed a strong
motivational factor to convince his family and himself to buy a new car. Rationally speaking, the
car was more than two years old and with the passing of each year, the resale value would
decrease. The other issue of his low back pain because of travelling in the low seated Alto also had
to be considered. Concerns about his health over the long term clinched the decision in favor of
investing in a new car.

CHOOSING THE RIGHT CAR

The next dilemma for Madhavan was which car to buy. Some of the cars that he was considering
were:
a. Maruti Suzuki‘s high-end models
b. Tata‘s latest models
c. The Fiat Punto
d. The Hyundai i10
e. The Chevrolet Spark.
Madhavan started collecting information about various cars from different sources which gave a
comparison of the price, features, and other specifications of various cars along with colorful
visuals (Refer to Exhibit I for a comparison of various car models). He also visited various
showrooms and test drove vehicles such as the Punto, the Manza, etc.
Finally, Madhavan decided he wanted to remain loyal to the Maruti Suzuki brands. The rationale
behind this was his experience with the brand. Maruti Suzuki had an established network of
service centers and accessories and spare parts were easily available at low prices. Moreover, it
had many experienced mechanics at its service centers.
When he visited the showroom, the salesperson Peter started providing him with details about the
various cars and models. Madhavan noted that brands such as Wagon R were being offered at a
sizeable discount. ―No wonder. It‘s an eight year old brand!‖ he thought. He liked the latest model,
the Swift Dzire, the most, but the price proved to be a constraint. He did not consider the A-Star at
all, as his colleagues had not talked favorably about the model. The other option before Madhavan
was the Ritz, Suzuki‘s latest model, launched as the Splash in Europe. The only problem with this
car, according to Madhavan, was that the rear design was different from the usual designs.
However, he was impressed with the space and technical features – it looked big inside.
On the way back from the showroom, Madhavan picked up some Auto magazines such as Top
Gear to check the details of Ritz. He found the reviews favourable. Some reviewers had praised
the model saying that it combined the latest engine technology with style and sporty features.
Madhavan was now almost certain that the Ritz was going to be his next car.

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 Rendezvous with RITZ: Dilemma of Buying the Right Car

The final step was to arrange the finance for purchase. Madhavan managed to sell the old car for
Rs. 185,000. Since Maruti Citi Corp., from where Madhavan had taken his earlier loan for his
Alto, had closed down, he had to get a loan from somewhere else. Peter arranged for a loan from
Kotak Mahindra. The amount required to purchase the new car was Rs. 65,000 as down payment
and the rest to be paid through EMI of Rs. 8,650 over five years.
Madhavan‘s wife selected the color of the car (Refer to Table I for a list of the available car
colours) —Blazing Blue. The model was picked from the base models, VXi, VDi, and Zxi, which
claimed to offer 18.7 kmpl. The Vxi consisted of automatic electronic windows, a center lock,
head rests for the back seats, and protection for the front and back plastic bumpers. Madhavan had
found the poor quality of the non-showroom accessories he had bought for his Alto really
disappointing, so this time around he decided to go in for the showroom accessories. Finally, the
loan was processed, and the car was delivered to him.
Table I Available Car
Colours
Midnight Black

Blue Blaze Racing Green

Glistening Grey Fire Brick Red Bakers Chocolate

Silky Silver Superior White

Source: www.carwale.com/research/marutisuzuki-cars/ritz/vxibsiv-colors-1532.html

THE CENTER OF ATTRACTION

Madhavan was happy with his new car. Some of his neighbours complimented him saying that the
Ritz looked good and different. However, some of them clearly did not like the color and asked
him whether no other color had been available.
But looking at the car, Madhavan felt that it stood out in the crowd. His colleagues told him that
the color helped them identify his car immediately. Madhavan was very happy with the car‘s
interiors, space, mileage, and overall design. He found the wheel base good and the car easy to
maneuver in the city traffic. He loved the way people quickly turned to get a second look at the car
and attributed their interest to its sporty design. Whenever someone asked him for details about the
car, Madhavan made it a point to mention that the same model had been launched as the ‗Splash‘
in Europe.
When driving through the city, he came across a hoarding which proclaimed the Ritz to be the
‗Best Car of the Year‘. This made him even happier. It became a game for him to look out for new
RITZ cars moving in the traffic or parked in the parking zones.
There was another reason for Madhavan to rejoice; his lower back pain had almost disappeared.
Madhavan‘s wife was also happy with the new car. Madhavan was driving with her one day when
she asked him,, ―If ‗Let‘s go‘ was for the Alto,what is it for the Ritz?‖ Madhavan had to admit that

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 Rendezvous with RITZ: Dilemma of Buying the Right Car

he didn‘t know, whereupon she said, ―It‘s ‗Live the moment!‘‖ While the couple was happy with
their decision to buy the new car, Madhavan‘s colleagues Rastogi and Gupta too approved of his
decision.
However, barely a few months after he had made the purchase, Madhavan was taken aback when
he read that the prices of the Ritz had been revised downward. He tried to comfort himself by
reasoning that he had bought the car immediately after it was launched. So, obviously the
discounts would be given later. ―I am happy that I bought it in November since there was a hike in
certain charges like life tax in the budget,‖ he told his colleagues when they brought up the issue
with him on the way to his office. But there was a niggling doubt in his mind. Had he really taken
the right decision, he wondered..

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 Rendezvous with RITZ: Dilemma of Buying the Right Car

Exhibit I
Comparison of Various Cars

Maruti Fiat Grande Chevrolet

Hyundai i10 Chevrolet
Suzuki Ritz Punto 1.2 Beat 1.2 LT
Sportz 1.2 Spark 1.0 LS
Vxi BS IV Emotion Option Pack

Ex-
Showroom Rs. 435,046 Rs. 438,153 Rs. 498,724 Rs. 350,593 Rs. 449,520
Price

Features

Air
Conditioner √ √ √ √ √
Power
Windows √ √ √ √ √
Power
Steering √ √ √ √ √
√
Anti-Lock Optional
Braking √ √
System

Air-Bags
(Driver | | | | |
Passenger) √√
Leather Seats

CD Player
√ √ √
Maruti Fiat Grande Chevrolet
Hyundai i10 Chevrolet
Specs Suzuki Ritz Punto 1.2 Beat 1.2 LT
Sportz 1.2 Spark 1.0 LS
Vxi BS IV Emotion Option Pack

Overall
3715 3565 3987 3495 3640
Length (mm)

Overall 1680 1595 1687 1495 1595

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 Rendezvous with RITZ: Dilemma of Buying the Right Car

Maruti Fiat Grande Chevrolet

Hyundai i10 Chevrolet
Suzuki Ritz Punto 1.2 Beat 1.2 LT
Sportz 1.2 Spark 1.0 LS
Vxi BS IV Emotion Option Pack

Width (mm)

Overall
1620 1550 1495 1518 1520
Height (mm)

Kerb Weight
1015 860 1140 840 965
(kg)

Mileage
Overall 12.8 12.8 13.8
(km/liter)

Seating
Capacity 5 5 5 5 5
(person)

No of Doors 5 5 5 5 5

Displacement
1197 1197 1172 995 1199
(cc)

Power
85@6000 80@5200 68@6000 63@5400 80@6200
(PS@rpm)

Torque (
113@4500 111@4000 96@2500 90@4200 108@4400
Nm@rpm)

Transmission
Manual Manual Manual Manual Manual
Type

Gears 5 5 5 5

Minimum
Turning 4.7 4.7 4.6
Radius
(meter)

165 /80 R 155/80 R13

Tyres 175 / 70 R14 155 / 70 R13 155 / 70 R14
14 (Tubeless)

Source:
www.carwale.com/research/comparecars/carcomparison.aspx?car1=1532&car2=1378&car3=175
0&car4=1159