Mahindra and mahindra strategy


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Mahindra and mahindra strategy

  1. 1. Guide: Dr Abhijit Gangopadhyay<br />CASE STUDY:Mahindra & Mahindra Ltd. – Farm Equipment Sector: Acquisition of Jiangling Tractor Companyby<br />N. KrishnaKumar<br />Bihag Shah<br />Gowri Sundarmurthy<br />Nivedit S. Mathur<br />Date:4th June 2010<br />
  2. 2. Outline of the presentation:-<br />Introduction of Case<br />M&M’s Vision and Mission<br />OD & Business Strategies<br />JTC<br />Feasibility Study of JV – SWOT Analysis<br />Recommendations <br />JV of M&M and JTC<br />
  3. 3. Mahindra & Mahindra : A to Z <br /><ul><li> Established on 2nd Oct 1945 jointly (Mahindra & Mohammed) </li></ul>K.C. Mahindra<br />Gulam Mohammed<br /> J.C. Mahindra<br /><ul><li>Mahindra & Mohammed changed to Mahindra & Mahindra.
  4. 4. Diversified business in other sectors such oil drilling, bearings, times-share resorts and instrumentation in addition to Jeeps & tractors.</li></li></ul><li>Vision & Mission<br />Vision:-<br />Indians are second to none in the world. The founders of our nation and of our company passionately believed this. We will prove them right by believing in ourselves and by making M&M Ltd. known worldwide for the quality of its product and services.<br />Mission:-<br />“We don’t have a group-wide mission statement. Our core purpose is what makes all of us want to get up and come to work in the morning” -Anand Mahindra<br />
  5. 5. Organizational Development: The need for Change:<br />Business Strategy<br />“Any Company would not remain overtime, in business that did not have a global potential.” – Anand Mahindra.<br /><ul><li> Each headed by President – part of group Management board.
  6. 6. Lateral Recruitment in company.</li></li></ul><li>Organizational Development: The need for Change:<br />Business Strategy:<br /> In Dec 2001, company identified FES (Farm Equipment Sector) as a core business.<br /><ul><li> In 2002, Operation Blue Chip was implemented.</li></ul>It aimed at strengthening domestic operations as a precursor to going global.<br />“ GO HOME THEN GO ABROAD”<br />Operation Blue Chip:-<br /><ul><li> Replaced performance measures into two new benchmarks</li></ul>Market Share Free Cash Flow<br />Sales<br />Profits Return On Capital Employed (ROCE)<br /><ul><li> Reserve of INR 7 billion generated by Apr 2004.</li></li></ul><li>Organizational Development: The need for Change:<br />Anticipation of Market & Business Strategy: <br /><ul><li> In 2000, Project Vishwajeet was implemented, conceptualized by McKinsey & Company.
  7. 7. Bring down the break-even point from 54,000 units to 35,000 units by 2003.
  8. 8. Only company to make profit in 2001 when the domestic market collapsed.
  9. 9. In 2003, won Deming Prize for major advances in quality improvement; the only tractor company in the world to win the award.</li></li></ul><li>Organizational Development: The need for Change:<br />Business Strategy: Globalization Template - Filters<br />For Company Selection<br /><ul><li>Product Portfolio
  10. 10. Product Technology
  11. 11. Market Reach
  12. 12. Quality Systems & Processes
  13. 13. Scalability
  14. 14. Openness Of Management
  15. 15. Liabilities</li></ul>For Market Selection<br /><ul><li>Industry Filter
  16. 16. Product/Technology Filter
  17. 17. Price/Earning Filter
  18. 18. Attractive But Low Volume Market
  19. 19. Price Sensitive But High Volume Market
  20. 20. High Tech & High hp Market</li></ul>Jingling Tractor Company (JTC)<br />USA, China, Australia & Africa<br />
  21. 21. CHINA MARKET – ENTRY STRATEGY<br />Step 1: <br />A team & tractors were sent to China from India to test the market opportunity.<br />Step2:<br />The team targeted a single province having large land holdings suitable for company’s 25 – 75 hp range of tractors.<br />Step 3:<br />Sold tractors at a price 20% higher than the rivals (John Deere), sending strong message of, “Superior Quality & Performance”.<br />Step 4:<br />Tie – up with a local partner<br />
  22. 22. Jiangling Tractor Company : A to Z <br />HISTORY<br /><ul><li>Part of government owned Jiangling Motor Company (JMCG).
  23. 23. 30 % stake of JMCG was owned by U.S Ford Motor Company.
  24. 24. Factory located at Nanchang with production capacity of 10,000 units & 3,000 engines annually.
  25. 25. Operated in 20 – 30 hp range with 42 dealerships.
  26. 26. Work force of 710 people which was 50 % more than the requirement.</li></li></ul><li>DOWNTURN IN TURNOVER<br /><ul><li>Problem of low-capacity utilization, surplus labor & escalating costs.
  27. 27. Contribution of JTC in JMCG turnover fell from $1billion to $3.5 million.
  28. 28. JMCG decided to de-focus on JTC by offloading 80% of tractor affiliate.
  29. 29. Government was also interested in exiting the tractor business.</li></li></ul><li>BUSINESS STRATEGY OF JTC TO OVERCOME DOWNTURN<br /><ul><li>Concept of, “Reverse Engineering” was implemented.
  30. 30. Partnering with local universities for new technology development.
  31. 31. More focus on global market inspite of only 2.5% domestic market share.
  32. 32. Still struggled to sustain in the market.</li></li></ul><li>Feasibility Study of JV<br />
  33. 33. Existing PRODUCTS New<br />INCREASING RISK<br />Existing<br />MARKETS<br />New<br />MARKET PENETRATION<br />Sell more in existing Markets<br />INCREASING RISK<br />ANSOFF MATRIX ANALYSIS<br />PRODUCT DEVELOPMENT<br />Sell new products in existing markets<br />MARKET EXTENSION<br />Achieve higher sales/market share of existing products in new markets<br />DIVERSIFICATION<br />Sell new products in new markets<br />
  34. 34. Existing PRODUCTS New<br />INCREASING RISK<br />Existing<br />MARKETS<br />New<br />MARKET PENETRATION<br />Highest domestic market share of 25.9% in 2004<br />INCREASING RISK<br />ANSOFF MATRIX ANALYSIS<br />PRODUCT DEVELOPMENT<br />NIL<br />MARKET EXTENSION<br /><ul><li>Export to SAARC
  35. 35. Attractive but low Volume Market
  36. 36. Price sensitive but high volume market</li></ul>DIVERSIFICATION<br />No focus on, “High tech & high hp market”.<br />
  37. 37. Strength<br /><ul><li> Extended product portfolio of M&M (20-30hp).
  38. 38. JTC - Focus on Quality
  39. 39. State owned enterprise –local brand name readily available “Feng Shou”.
  40. 40. Technically skilled team of JTC readily available.
  41. 41. Govt. Support
  42. 42. Influence on manufacturing facilities from Ford & Isuzu who were collaborated with JTC.
  43. 43. Good Chemistry with Management & Straight forward Mang. style</li></ul>Weakness<br /><ul><li> Restructuring of JTC.
  44. 44. Over head cost & surplus resources of JTC.
  45. 45. Lack of Efficiency in new plant layout.
  46. 46. Multi franchise.
  47. 47. Ineffective Dealership – often switched to competitors.
  48. 48. JTC global focus.
  49. 49. Cultural barriers like language & food habits.</li></ul>SWOT Analysis<br />Opportunities<br /><ul><li> Can fulfill M&M’s goal to be global player.
  50. 50. Easy entry to Chinese market with support of local partner.
  51. 51. To export the Chinese tractors range to India & Indian tractor range to China to suit the demand respectively.
  52. 52. If M&M provided after sales services they can be more competitive in Chinese market.
  53. 53. Expected growth of 13.2% 2004 to 2008.
  54. 54. Further open door to US market where FS254 of JTC was already doing well.</li></ul>Threats<br /><ul><li> Undeveloped Banking facility in China.
  55. 55. Legal considerations.
  56. 56. JTC was part of JMCG & even Ford holding 30% stake, so 3 companies were involved in JV.
  57. 57. Distant location of the Manufacturing units from the city.</li></li></ul><li>Reasons for Going for JV<br />
  58. 58. Recommendations<br /><ul><li> Process of JV – JV agreement, securing approval of company name, business license.
  59. 59. Asset transfer contract.
  60. 60. Protocol for takeover of plant equip., inventory, land & building.
  61. 61. Finalizing contracts with suppliers and dealers of JTC.
  62. 62. Game Changer – After Sales Services.
  63. 63. Restructuring.
  64. 64. Improve Over head cost.</li></ul>(Star Fish Analysis)<br /><ul><li> Training of the employees
  65. 65. Improve the existing accounting and costing system.
  66. 66. Mapping skills of employees.</li></ul>Keep Doing<br />Start Doing<br />More of<br />Stop Doing<br /><ul><li> Study of the Chinese & Export market.
  67. 67. Establishment in Chinese market.
  68. 68. After Sales services.
  69. 69. Exclusive Franchise.</li></ul>Less Of<br /><ul><li> Entry through Green field projects.
  70. 70. Hi-tech & High HP product as the demand is less.</li></li></ul><li>M&M ACQUISITION OF JIANGLING TRACTOR COMPANY<br />Jiangling Tractorfacility.<br />Signing of the MOU in China.<br />Mahindra officials with the JTC team.<br />Mr. Anand Mahindra, VC & MD, M&M, <br />visits the Chinese facility with JTC officials.<br />
  71. 71. JIANGLING TRACTOR COMPANY - CHINA<br />Inside view of the JTC facility.<br />Inside view of the JTC facility.<br />Scouting for a partner in China.<br />The China Task Team.<br />