Guide: Dr Abhijit Gangopadhyay CASE STUDY: Mahindra & Mahindra Ltd. – Farm Equipment Sector: Acquisition of Jiangling Tractor Company by Bihag Shah N. KrishnaKumar Gowri Sundarmurthy Nivedit S. MathurDate:4th June 2010
Outline of the presentation:-1. Introduction of Case2. M&M’s Vision and Mission3. OD & Business Strategies4. JTC5. Feasibility Study of JV – SWOT Analysis6. Recommendations7. JV of M&M and JTC
Mahindra & Mahindra : A to Z• Established on 2nd Oct 1945 jointly (Mahindra & Mohammed) J.C. Mahindra K.C. Mahindra Gulam Mohammed•Mahindra & Mohammed changed to Mahindra & Mahindra.• Diversified business in other sectors such oil drilling, bearings, times-shareresorts and instrumentation in addition to Jeeps & tractors.
Vision & Mission Vision:- 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.Mission:- “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
Organizational Development: The need for Change: Business Strategy Automotive Trade Restructuring“Any & into in Farm Company would not remain overtime, Equipmentbusiness that did nothave a global Financial potential.” – Anand Mahindra. Services Services 4 SBU’s IT Services Each headed by President – part of group Management board. Lateral Recruitment in company.
Organizational Development: The need for Change:Business Strategy: In Dec 2001, company identified FES (Farm Equipment Sector) as a corebusiness.• In 2002, Operation Blue Chip was implemented.It aimed at strengthening domestic operations as a precursor to goingglobal. “ GO HOME THEN GO ABROAD”Operation Blue Chip:-• Replaced performance measures into two new benchmarksMarket Share Free Cash FlowSalesProfits Return On Capital Employed (ROCE)• Reserve of INR 7 billion generated by Apr 2004.
Organizational Development: The need for Change: Anticipation of Market & Business Strategy: • In2000, Project Vishwajeet was implemented, conceptualized by McKinsey & Company. •Bring down the break-even point from 54,000 units to 35,000 units by 2003. •Only company to make profit in 2001 when the domestic market collapsed. • In 2003, won Deming Prize for major advances in quality improvement; the only tractor company in the world to win the award.
Organizational Development: The need for Change: Business Strategy: Globalization Template - FiltersFor Market Selection For Company Selection•Industry Filter •Product Portfolio•Product/Technology Filter •Product Technology•Price/Earning Filter •Market Reach •Quality Systems & Processes •Scalability•Attractive But Low Volume Market •Openness Of Management•Price Sensitive But High Volume •LiabilitiesMarket•High Tech & High hp Market USA, China, Australia & Africa Jingling Tractor Company (JTC)
CHINA MARKET – ENTRY STRATEGYStep 1:A team & tractors were sent to China from Indiato test the market opportunity. Step2: The team targeted a single province having large land holdings suitable for company’s 25 – 75 hp range of tractors. Step 3: Sold tractors at a price 20% higher than the rivals (John Deere), sending strong message of, “Superior Quality & Performance”. Step 4: Tie – up with a local partner
Jiangling Tractor Company : A to Z HISTORY•Part of government owned Jiangling Motor Company (JMCG).•30 % stake of JMCG was owned by U.S Ford Motor Company.•Factory located at Nanchang with production capacity of 10,000 units &3,000 engines annually.•Operated in 20 – 30 hp range with 42 dealerships.•Work force of 710 people which was 50 % more than the requirement.
DOWNTURN IN TURNOVER•Problem of low-capacity utilization, surplus labor & escalating costs. 3000 0 2500 500 2000 1000 1500 1500 1000 2000 500 2500 0 3000 Budget 2004 Jul-04 2003•Contribution of JTC in JMCG turnover fell from $1billion to $3.5 million.•JMCG decided to de-focus on JTC by offloading 80% of tractor affiliate.•Government was also interested in exiting the tractor business.
BUSINESS STRATEGY OF JTC TO OVERCOME DOWNTURN•Concept of, “Reverse Engineering” was implemented.•Partnering with local universities for new technology development.•More focus on global market inspite of only 2.5% domestic marketshare.•Still struggled to sustain in the market.
Strength Weakness Extended product portfolio of M&M (20-30hp). Restructuring of JTC. JTC - Focus on Quality SWOT Analysis & surplus resources of JTC. Over head cost State owned enterprise –local brand name readily Lack of Efficiency in new plant layout.available “Feng Shou”. Multi franchise. Technically skilled team of JTC readily available. Ineffective Dealership – often switched to Govt. Support competitors. Influence on manufacturing facilities from Ford & JTC global focus.Isuzu who were collaborated with JTC. Cultural barriers like language & food habits. Good Chemistry with Management & Straightforward Mang. style Opportunities Threats Can fulfill M&M’s goal to be global player. Undeveloped Banking facility in China. Easy entry to Chinese market with support of Legal considerations.local partner. JTC was part of JMCG & even Ford holding 30% To export the Chinese tractors range to India & stake, so 3 companies were involved in JV.Indian tractor range to China to suit the demand Distant location of the Manufacturing units fromrespectively. the city. If M&M provided after sales services they canbe more competitive in Chinese market. Expected growth of 13.2% 2004 to 2008. Further open door to US market where FS254of JTC was already doing well.
Reasons for Going for JV M&M Objective Fulfillment by JTC1) 20% turn over by 2009 2.5% in Chinese Market and 13% in <25hp category.2) Product range Complementary to M&M’s range. 18- 33hp of JTC – requirement of growing Indian Market and higher hp from India to China3) Chinese Market entry “Feng Shou” brand was popular already.4) Management JTC – Straightforward and Cooperative Management.5) Manufacturing facilities Influenced by Ford & Isuzu6) Company focus Quality focus & Readiness to M&M’s quality practice.
• Process of JV – JV Recommendationsagreement, securing approval ofcompany name, business license. (Star Fish Analysis)• Asset transfer contract.• Protocol for takeover of plant • Training of the employeesequip., inventory, land & building. • Improve the existing accounting and• Finalizing contracts with suppliers costing system.and dealers of JTC. • Mapping skills of employees.• Game Changer – After SalesServices.• Restructuring.• Improve Over head cost. Start Doing Keep Doing Stop Doing More of • Study of the Chinese & Export market. • Entry through Less Of Green field projects. • Establishment in Chinese market. • Hi-tech & High HP • After Sales services. product as the • Exclusive Franchise. demand is less.
M&M ACQUISITION OF JIANGLING TRACTOR COMPANY Signing of the MOU in China. Jiangling Tractor facility. Mahindra officials with the JTC team. Mr. Anand Mahindra, VC & MD, M&M, visits the Chinese facility with JTC officials.
JIANGLING TRACTOR COMPANY - CHINA Inside view of the JTC facility. Inside view of the JTC facility.Scouting for a partner in China. The China Task Team.