Dr. Haribandhu Panda
Aruna Kumar Sahu (S0805)
Deviprasad Das (S0813)
Julfukar Khan (S0823)
Pratik Kumar Das (S0841)
Sitansu Sekhar Sahu (S0860)
1.1 Rational of the project
1.2 Tractor Industry
1.3 Manhindra Tractor
1.4 Chapter Plan
2. INDUSTRY ANALYSIS OF TRACTORINDUSTRIES………………… 4
2.1 PESTEL Analysis of Tractor Industries…………………………. 4
2.2. DIAMOND Analysis of tractor industries………………………..6
2.3. Five force analysis of tractor industries…………………………..8
2.4. Key players……………………………………………………….. 10
2.5. Drivers of Change …………………………………………………12
2.6. Opportunity and Threats …………………………………………13
3. ORGANIZATIONAL ANALYSIS…………………………………………14
3.1 Mission, Vision, objective and strategy followed………………....14
3.2 BCG Matrix..………………………………………………………..16
3.3 Critical Evolution…………………………………………………...16
3.4 New Mission and vision……………………………………………..17
3.5 Resource Analysis……………………………………………………17
3.7 Strength and Weakness……………………………………………...20
3.8 Strategic clock………………………………………………………..21
3.9 Ansoff Matrix………………………………………………………..22
This project is as the part of assignment for the partial fulfillment of Strategic Formulation
Management course of fourth trimester, where the objective is to know and analyze the
various strategic concept of Mahindra & Mahindra tractor.
The tractor industry in India has developed over the years to become one of the largest tractor
markets in the world. From just about 50,000 units in early eighties the size of tractor market
in the country has grown up to over 200,000 units. Today industry comprises of 14 players,
including 3 MNCs. The opportunities still are huge considering the low farm mechanization
levels in the country, when compared to other developed economies across the world. Key
concern for the industry is its dependence on agricultural income in hands of farmers and the
state of monsoon. The key players are Sonalike, Jhon Deer, Mahindra, New Holland etc.
Mahindra and Mahindra Limited was incorporated on October 2, 1945 as a private limited
company under the Indian Companies Act of 1913 by two brothers, Mr. J.C. Mahindra and
Mr. K.C. Mahindra. It was converted into a public limited company on June 15, 1955.
Mahindra & Mahindra Ltd, one of the largest private sector company in India, is the flagship
company of the Mahindra Group. The company commenced operations in 1945 to
manufacture General Purpose Utility Vehicles and later on entered into manufacturing of
Tractors and Light Commercial Vehicles (LCVs). Over the years, the company has expanded
its operations from automobiles and tractors to steel, trading and manufacturing of Ash
Handling Plants & Traveling Water Screens. The company is focused to become a world
giant in the tractor business. It has already made its presence felt in countries in Europe, Latin
America, Africa and United States of America.
II. Industrial analysis
III. Organizational analysis
Industry analysis: There are various analysis are being done to know both immediate and
PESTEL analysis: There are many factors in the environment that will affect any
organization. Tax changes, new laws, trade barriers, demographic change and government
policy changes are all examples of macro change. To help in analyze these factors we can
categorize them using the PESTEL model. This classification distinguishes between political,
economical, social, technological, ecological and legal factor. By PESTEl analysis we can
know about extended environment and key drivers of change of an organization.
Political factors: These refer to government policy such as the degree of intervention in the
economy. What goods and services does a government want to provide, to what extent does it
believe in subsidizing firms, what are its priorities in terms of business support and political
decisions can impact on many vital areas for business such as the education of the workforce,
the health of the nation and the quality of the infrastructure of the economy such as the road
and rail system.
The political factors related to tractor industry are
• Government laid stress on the mechanization of agriculture with a view to boost food
grain production. Therefore agriculture sector started receiving financial assistance.
• Subsidy on agricultural loans from government
• Change in taxation policy
• 100% FDI policy
• Regaining “ Agricultural dynamism”, a key goal of eleventh Five year plan
Economical Factors: These include interest rates, taxation changes, economic growth,
inflation and exchange rates. Economic change can have a major impact on a firm's
The economics factors related to tractor industry are:
• 95% of tractor sales are on credit. Credit is extended by commercial banks, state land
development banks and regional rural banks.
• Cost of tractors in India is the cheapest in world .The cost of a finished tractor here is
as much as the cost of gear box in developed countries. Hence there exists tremendous
scope for exports.
• Detoriating foreign exchange situation in western country, poor buying capacity and
comparatively cheaper import of second hand tractor from developed country reduces
the export of tractor from India in recent days.
• Less interest rate charged by banks for agricultural inputs
• inflation may provoke higher wage demands from employees and raise costs
• higher national income growth may boost demand for a firm's products
Social factor: Changes in social trends like population increase can impact on the demand
for a firm's products and the industry as a whole.
The social factors related to tractor industry are
• Due to land fragmentation farmers with small land holding are buying tractor
• There is an increase in awareness among the farmers for the need of farm
mechanization and are keen to acquire tractor with the help of credit facilities from
• there is need for more tilling due to depletion of moisture and repeated cultivation of
land .It is precisely for this reason that the demand for tractors was well maintained
even during a draught period
• Animal power available is too inadequate to meet power demand of our farmers.
Mechanized operations are preferred to eliminate drudgery and delay, also labor
shortage during harvesting increased the use of tractor
• More farmers are opting for multiple cropping over last decade. Country's gross
cropped area increased by about 4.7%. This indicates the increased popularity of
Technological factor: New technologies create new products and new processes.
Technology can reduce costs, improve quality and lead to innovation. These developments
can benefit consumers as well as the organizations providing the products. Sometimes the
technology reduces the life cycle of products. The technological factors related to tractor
• Accelerated acquisition of technology capabilities to raises productivity in agriculture.
• Continuous technological innovation
• Renewable energy development. Ex, coal gas renewable
Ecological factors: Ecological factors include the weather and climate change. Changes in
temperature can impact on many industries including farming. With major climate changes
occurring due to global warming, Acid rain, Green- house effect and with greater
environmental awareness this external factor is becoming a significant issue for firms to
consider. The growing desire to protect the environment is having an impact on many
industries, as environmentally friendly products and processes are affecting demand patterns
and creating business opportunities.
The ecological factors related to tractor industry are
• Irrigation facilities reduce reliance on the monsoon and allow for quick yielding
varieties of food -grain .This reduces the cropping cycle to 3-4 months from the
traditional 5-6 months. Reduced cropping cycle require deep tilling which translates
into higher demand for tractors.
• Strong monsoons, increase lending by nationalized banks which leads to farming of
commodity prices money availability catapulted tractor demand.
• Global warming
Legal factors: These are related to the legal environment in which firms operate. In recent
years the changes legal factors of developed countries affected firms' behavior in other
countries due to globalization. Legal changes can affect a firm's costs if new systems and
procedures have to be developed and demand if the law affects the likelihood of customers
buying the good or using the service. The legal factors related to tractor industry are
• Collaboration with government which shapes policy issues
• Agricultural policy
Diamond Analysis: This analysis is done to know the fairness and suitability of a market.
The analysis is given below.
Customers are more
demanding because there is
a need of more production in
less time, numbers of bulls
for ploughing is decreasing
and they can use the tractor
for transportation purpose
also. Good financial support
for agricultural equipments.
Factor market condition Rivalary
This industry comprises of
14 players including 4
MNCs. There are big
Physical resources, financial competitors like TAFE,
resources, technological Escorts, PTL, ITL, Eicher,
innovation, raw material and John Deer and New Holand
skilled human power are are competing in market
easily available. which leads to a healthy
The related and supported
Related and supported
industry like casting
industry, Forging part
industry, Battery industry,
Engineer and Technological
agencies, Piston and Ring
industry are available
largely which leads to high
quality product with low
Five force analysis: from five force analysis we can know the industry structure and the
opportunity and threats. In is conducted to know about the immediate environment. The
competitive structure of an industry can be analyzed using Porter's five forces. This model
attempts to analyze the attractiveness of an industry by considering five forces within a
market. According to Porter (1980) the likelihood of firms making profits in a given
industry depends on five factors:
Bargaining power of buyer: The stronger the power of buyers in an industry the more likely
it is that they will be able to force down prices and reduce the profits of firms that provide
the product. For tractor industry:
• The consumer base of tractor is highly disbursed throughout India.
• Due to High switching cost tractors companies can compromise on quality and price
• Lack of awareness among farmers like pricing, offerings. Etc.
• there are a few, big buyers so each one is very important to the firm
This leads to low bargaining power of buyer
Bargaining power of supplier: The stronger the power of suppliers in an industry the more
difficult it is for firms within that sector to make a profit because suppliers can determine
the terms and conditions on which business is conducted. For tractor industry:
• The suppliers do not pose any threat of forward integration
• Though steel forms a major inputs , the tractor industry is not most important
customer for steel industry
• Many number of supplier are there for tractor industry
• Switching cost from one supplier to another is less
Hence bargaining power of supplier is less.
Threat of Entry: the extent to which barriers to entry exist. The more difficult it is for
other firms to enter a market the more likely it is that existing firms can make relatively
high profits. For tractor industry:
• The tractor industry is capital-oriented with intensive technology requirement
• Need of a large dealer network
• High switching cost
• Competitors are very reactive towards new entry
• Brand loyalty of existing brands is high in tractor industry, Ex, Mahindra in
• Up to extent the existing companies have control over the suppliers
• High startup capital is required
Hence the barriers to entry are high. These barriers are however moderated by 100% FDI
Threat of substitute: This measures the ease with which buyers can switch to another
product that does the same thin. The ease of switching depends on what costs would be
involved and how similar customers perceive the alternatives to be. For tractor industry:
• There are no credible substitutes to the tractors
• The only option available is bull-plough
• Power-tellers very low power of substitute
Hence there is low threat of substitute for tractor.
Rivalry: This measures the degree of competition between existing firms. The higher the
degree of rivalry the more difficult it is for existing firms to generate high profits. For tractor
• The rivalry is extremely high owing to the consolidation that the industry is
• Entry of foreign players
• Continuous technological innovation
• Less merger and acquisition of tractor industry increases rivalries
• Opening of world market
Hence there is high degree of industry rivalry.
Five –Force analysis
Porter 5 Forces Analysis Summary Snapshot http://en.wikipedia.org/wiki/Porter_5_forces_analysis
Key players: Today there are as many as 14 players operating into tractor manufacturing
activity in the count ry. However, about 90 per cent of market is shared among the top 5-6
players only. Mahindra and Mahindra continues to dominate the industry with close to 30 per
cent share, while other players like TAFE, Escorts, PTL, ITL and Eicher enjoys market share
of 15 per cent , 14 per cent , 11 per cent , 11 per cent and 9 per cent respectively.
TRACTOR COMPANY MARKET SHARE PERCENTAGE
Drivers of change: From the PESTEL analysis we can know the drivers of change
Opportunity and Threats
Factors Drivers of change Changes
Political Investment by government These drivers are making the
Extension of rural credit by
Subsidized by government
Economical Heavily depend upon rural Bank clamped down on credit.
economy Demand increases.
Credit availability at
Global economy melt down
100% FDI policy
High national income
Social Land fragmentation Moderate effect
Animal for agriculture
More farmers opting multiple
Per capita consumption is low
Technological High technological innovation High quality product
Import of technology
Coal and Gas renewable
Legal Collaboration with This attracts the more players
Industry levels opportunity:
• Huge increase in export: Indian tractors are cheapest in the world. It costs as much as
a gear box costs in a developed country. Indian tractors are gaining international
acceptance because of their standard. Thus there is a huge opportunity for exports to
various countries in Asia and Africa and exports have seen a growth of about 45% in
• Increase in credit availability: More private banks are also now lending credit to
farmers along with nationalized banks for purchasing farm machinery. This provides
an opportunity for growth in sales of tractor.
• Technological innovation: There are also several innovations taking place such as
fuel efficient tractors and tractor that use alternate energy source. These will be the
tractors of the future and if a company acquires competencies in this, it gains huge
• The government has been trying to strengthen the exports of agricultural products.
As a result, the quality of agricultural products necessarily has to be very high. For
this, they need better rural and agricultural infrastructure. This might result in an
increase in demand for tractors.
• In India, the penetration of tractors is 10 tractors per 1000 hectares of cropped area,
which is much below the world average of 19 tractors for the same. Thus there is
scope for the demand to increase.
• Mahindra & Mahindra had acquired a majority stake in Punjab Tractors Limited
(PTL) in early 2007. PTL is a good strategic fit to the company, as it comes with its
strength of efficient design (strong R&D abilities) and the Brand Swaraj, which
enjoys a strong customer loyalty for being sturdy and reliable. This acquisition has
an opportunity of getting advantages of economies of scale, sourcing benefits and
• Dependency on monsoon: the growth of tractor industry is heavily dependent on the
growth of agriculture. Good monsoon increases the agricultural GDP and hence
boost tractor sales. The sales dip significantly in the year when the monsoon fails.
• Entry of foreign players: they are no cap of FDI that can be invested in this industry.
Hence foreign players who wish to enter this industry do not need a joint venture or
any tie up with the existing Indian tractor manufacturers. Moreover, the foreign
players like John Deer and New Holland who have entered in the market have
technological superiority which poses a threat to current players.
• Farm land fragmentation: One measure characteristics of Indian farm land is that
they are heavily fragmented and are of small size. The farmers do not hold sizeable
chunk of land to use agricultural machinery like tractor in their land.
• The company has a history of having invested in unrelated diversifications such as
telecom, holiday and resort inns, financial services, etc. which it has hived off as
subsidiaries from time to time when these turned unmanageable. This is a cause for
concern as such diversifications could divert the company's attention from its core
business. It is a dangerous tendency as it leads to destruction of shareholders value.
Mission/Vision Goals and Objectives Strategy followed
Vision: Indians are second to To provide highly E-business Initiatives
none in the world. The technological innovative and by out sourcing of
founders of our nation and of product technology
our company passionately
believed this. We will prove Products that
them right by believing in redefined the market
ourselves and by making
M&M Ltd. known
By 2015 it wants to enter Joint ventures,
worldwide for the quality of
almost all continents of acquisition and
its product and services.
world merger with different
players in other
Plan to open 30 outlet pan in Restructuring of the
India by next 4 year company.
Network of dealers,
sales offices, service
Mission: We don’t have a to make the production proactively following world-
group-wide mission system even more efficient class methodologies like QC
statement. Our core purpose story and QC tools, Six
is what makes all of us want Sigma, DOE ( Design of
to get up and come to work Experiments) and TPM
in the morning” ( Total Productive
To usher prosperity; for its
customers, dealers, By developing good
employees, society and all citizenship behavior.
other stakeholders. Keeping good relationship
with customers by providing
better quality service and
providing latest information
To be the market leader in all Strong market base in
power segments of tractors. the urban, semi-urban
and rural areas.
USP – ruggedness and
k et i
New vision: to be the undisputed leader in world automobile and farming
The mission and vision are very general. The objectives are according to mission and visions.
There should be specific strategy for each objective. As there are many brands under
umbrella brand Mahindra and Mahindra, so there should be separate for all brands. Some
objectives are not quantified
New vision: To be the undisputed leader of world automobile and farming equipment
New Mission: To provide best value for money to customers through best quality and most
cost effective products and services.
Resource analysis- There is two types of resources i.e. Stock resources and capabilities
Stock Resources: These are the resources which are required to start any business at base
level. Physical, financial and technological resources are coming under stock resources.
1. Physical resources:
• High inventory capacity
• The parent company has its own Infrastructure Company, IT Company and
Financial service company.
• High quality equipments for production
• Many number of own out-lets
• Have own OEMs
• Large infrastructure
2. Financial resources:
• Highest market share
• High value of market share
• The company has an equity capital base of Rs. 110.5 crore and the number of
shares are 11.05 crore
• The market capitalization of the company, as on 30th March 2001, is Rs.
3. Human resources:
• The company is inducting senior management resources from diverse
companies like Xerox, Marico, Enron, Hindustan lever Ltd as well as from
engineering, tractor and automobile sectors. This enabled the company to
induct a talent pool with rich background which was suitable to the changing
business requirements of the group.
• Also in order to bring in young talent keeping in mind the long term
objectives, the group has started a formal Management Trainee Scheme
through campus recruitments. The move threw up an interesting observation,
that of acceptability of young blood working initially at operational level jobs
with older experienced people.
4. Technological resources:
• With plants in Mumbai and Nagpur, the farm equipment sector of Mahindra
and Mahindra manufactures tractors, which are state-of-the art and
technologically one of the most advanced.
• It is the companies that have established Total Quality Management in their
entire business operations ranging from human resources, product
development, sales and marketing processes, vendors to its commitment to
• Mahindra & Mahindra, the leading Indian automotive manufacturer for over
60 years, today announced a landmark breakthrough in Indian alternate fuel
technology. M&M today formally announced its emphasis on bio-diesel and
unveiled the bio-diesel
• M&M is a pioneer in R&D of alternate propulsion technologies in India and
had also set up its own bio-diesel pilot plant way back in 2001
• M&M has been seriously looking at technologies that will help enhance focus
on converting bio-mass to bio-fuels.
Capability resources: These are flow resources which are coming from competencies of
employees and capability of organizations. Production capability, marketing capability,
human resources development capability and steering capabilities are coming under
• The company has set up Mahindra Kisan Mitra (MKM), a Web site which
provides farmers the latest information relating to crops, weather conditions,
loans, insurance schemes, commodity prices, Government schemes, news and
• M&M carried our extensive studies on traditional engines and vehicles and
realized the need to develop vehicles for contemporary and fuel efficient
diesel engines like CRDE, meeting the world's latest emission norms.
• The first Indian tractor with turbo technology the 'Mahindra Sarpanch 595 Di
2. Production capability:
• Methodologies like TQM,QC story and QC tools, Six Sigma, DOE ( Design of
Experiments) and TPM ( Total Productive Maintenance) are available.
• Efficient and competent employees
• Process control in production
• Highest production capabilities( 1,50,000 tractors per year)
• Larger rural initiative Mahindra Samriddhi, which aims to increase
agricultural productivity through creative farming techniques.
3. Marketing capability:
• Huge distribution channel in rural, urban and semi urban area
• Established brand name
• Highly motivated sales people
• As part of this initiative, 30 Mahindra dealerships have been transformed into
Samriddhi centers, offering the farmer easy access to technological know-
how, hybrid seeds, soil and water-testing facilities, demo farms, finance and
insurance, Internet updates and sales and servicing of tractors and tractor
• Good advertisement strategy
• After sale service for longer period
• A quick “one-stop-shop” for promotion of company
4. Human resources development:
• Thrust is on building leadership development at middle and senior
management levels, where the emphasis is on strategy, leadership and change.
• Training and development programme to all level of employees.
• Proper succession and career planning.
• To avoid the feeling of animosity and in order to build camaraderie, the group
has put in place a Mentoring system, where each management trainee has a
senior executive who plays the role of mentor.
• The mentor reviews the progress made by the trainee every two-three months
and provides guidance and counseling if the need so arises.
Strength and Weakness of Mahindra Tractor
1. Market leader in terms of market 1. The company is highly
share is its biggest strength dependent on the rural sector
2. The company's ability to introduce 2. Less technological ability as
new products in the market and to compared to Foreign players
generate sales from those new 3. Low labor productivity
products is a major strength. The
reason being that this is very
essential for any company, for its
survival in the long run.
3. The company has established its
brand name in other countries of the
world as well which is biggest
strength of a company to extend and
diversify the business
4. Large and effective distribution
5. Sufficient financial resources
P Arjun Sarapanch vumiputr
Moderate e New
d n Sarapanc
Low Moderate High
Strategic clock helps to develops strategy with compared to competitors.
Direction and methods of strategy development:
Ansoff Matrix (Product-Market Matrix)
Existing New product
Market Development: Mahindra tractor is going to launch the old 21-70 hp tractors in china
market for which it has to develop its own market. That’s why it acquired Jiangling Tractor
Strategy of Consolidation: As it is operating in India market with its existing tractors it has
to reduce cost of production and to develop bases for differentiation to achieve competitive
advantage over other competitors.
Product development: As India is it’s its existing market and there are so many competitors
including 4 MNCs and other foreign players the company should develop new product. So
company has to develop its own R&D capabilities.
Strategy of Diversification: As Mahindra tractor is going to launch new product in new
market like china it should go for related diversification. In related diversification it has gone
for both vertical and horizontal diversification.
Horizontal Diversification: In this Mahindra has already acquired complementary company
like Yacheng vehicle utility company in China, Hinoday casting and Ferrites Company and
Castrol of India.
Vertical Diversification: These diversifications are goes along the value chain of a
company. In this company has gone for acquiring some advertisement agency, component
part industry and a market research company.
Internal Development: Develops its own R&D, OEM and Finance company
Acquisition or by External support: Acquised various companies like PTL, Yacheng and
Jiangling for diversification both in Indian and Foreign market
Joint Development: Developed own engine oil jointly with Servo.
1. Marketing Recommendations:
a. Focus on 41-50 hp segment tractors: Industry analysis demonstrates a tangible
demand shift from 21±30HP category to higher HP category while Mahindar
is less focusing on 41-50 hp category. Marketing efforts should be accordingly
re-directed towards the 41-50 HP categories to prevent further decline in
b. Develop in-house credit lending facility: Credit lending is increasingly
playing an important role in purchase decision process. Mahindra should try to
give lending facility to all by its own finance company in order to drive up
demand for its products.
2. Focus on Channels
a. Ensure higher distributor margins: Distributors have a significant impact on
shaping end- consumer preferences. Ensuring higher distribution margins
would provide necessary monetary incentive for distributors to tout for
Mahindra tractors, especially given very low levels of end-consumer
b. Provide tractors on lease through govt. agencies: Mahindra tractors can be
made available on lease in partnership with government agencies as sugar mill
co-operative societies. Government partnership would impart a stamp of
reliability on Mahindra tractors and at the same time, provide -platfoa ³testrm
for the farmers who would definitely consider Escorts when buying a tractor in
3. Expand geographically
a. Leverage international presence: Cross-geography expansion would help it
leverage synergies between the tractors and auto parts business units on a
much larger scale.
b. Diversify Tractors - Monsoons correlation: Tractor sales, as already seen, are
driven by monsoons. A bad 3-months monsoon season generally translates
into large inventories, as seen in the dry spell of 2001-03. Geographical
expansion would help diversify tractors sales ± monsoon correlation, thus
bringing down inventories to free up locked-up capital.
From the above it is clearly found that the performance of Mahindra and Mahindra tractor in
this tractor market is very encouraging. And the business strategy is very highly competitive
and innovative. The company should concentrate on strategies like cost advantage and
differentiation. Also the emerging market of tractor industry is very encouraging, so only
thing is to follow the strategy which will be able to meet the customer needs. As far as
resource is concerned Mahindra & Mahindra is very strong in resource an d and capabilities.
1. Tractor Industry - http://dsir.nic.in/reports/techreps/tsr042.pdf
2. Acquisition Candidates ±
3. Mahindra & Mahindra Limited
4. Eicher Motors - http://en.wikipedia.org/wiki/Eicher
5. Escorts Group - http://www.mahindragroup.com
6. Tractor Industry in India ± Present and Future -
7. Tractor industry fortunes on the upswing -
8. The Escorts story: Can it be saved? -
9. Tractors in India - http://en.wikipedia.org/wiki/Tractors_in_India
10. Indian Agricultural Machinery Market: An Investment Perspective -
11. Gujarat innovator's Rs 1.6 lakh tractor -
12. Tractor Industry in India - http://www.indianmba.com/Occasional_Papers/OP127/
13. IT² Information Technology and the Human Interface Tractor Vibration Severity
Health: a Study from Rural India -