mahindra&mahindra - globalization from an indian company's perspective

8/4/2019 Mahindra&Mahindra - Globalization From an Indian Company's Perspective

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LOYOLA INSTITUTE OF BUSINESS ADMINISTRATION

Mahindra & Mahindra

AutomotiveGlobalization from an Indian companysperspective

Submitted by:

Chris Joseph (F10070)

Dhaneesh A.S (F10074)Gracelyne Fernando (F10077)

Mithun Dani (F10089)

Naveen Thomas (F10092)

Nivedita Thiagarajan (F10096)

Ronald Riju (F10106)

Mario S. (F10029)

Vaibhav Mehta (F10057)


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In 1945 the Mahindra brothers joined hands with Ghulam Mohammed and started Mahindra &

Mohammed, a steel trading company. Building on their expertise in the steel industry, the

Mahindra brothers began trading steel with UK suppliers. When K.C. Mahindra visited the

United States of America as Chairman of the India Supply Mission, he met Barney Roos,

inventor of the rugged 'general purpose vehicle' or Jeep and had a flash of inspiration: wouldn't a

vehicle that had proved its invincibility on the battlefields of World War II be ideal for India's

rugged terrain and its rural roads? Swift action followed thought and on October 2nd, 1945,

Mahindra & Mohammed was set up as a franchise for assembling jeeps from Willys, USA.

Two years later, India became an independent nation and Mahindra & Mohammed changed its

name to Mahindra & Mahindra. Ghulam Mohammed migrated to Pakistan post-partition and

became the first Finance Minister of Pakistan.

Immediately after World War II, the cars that were assembled were completely knocked-down

(CKD) Willys Jeeps that were imported to India from the US. In the early days of their

operation, only 10 percent of the components for the Willys Jeeps were sourced in India, but this

percentage gradually increased to 17 percent. The 1950s brought with it a sea change in

Mahindra & Mahindra; plans were submitted to the Indian government in 1954 to increase the

amount of Indian-manufactured parts and decrease the number of CKD kits imported. The plans

were approved, and in April 1955 the company purchased a factory at Bhandup, and gradually

the Mahindra Company shifted from assembling CKD Jeeps to license building Jeeps.

By 1956, the company was listed on the Bombay Stock Exchange, and by 1969 the company had

entered the world market as an exporter of utility vehicles and spare parts.

Like many Indian companies, Mahindra and Mahindra too was not spared from the ill effects of

the License Raj and Indias Hindu rate of growth that prevailed at that time. Guiding Mahindra

through these tumultuous times was Keshub Mahindra. The Wharton-educated Keshub

Mahindra joined the company in 1947 and went on to become the chairman in 1963. It was under

his leadership that Mahindra and Mahindra ferried its way through the difficult years of the

license raj and saw the dawn of liberalization. Keshub Mahindra responded to the restrictions of

the License Raj by expanding into other industries.


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In 1947, Mahindra introduced India to the utility vehicle. More than 65 years later, it is still

India's premier utility vehicle (UV) company. In addition to making UVs like the Scorpio and

Bolero, Mahindra offers cars, pickups, and commercial vehicles. Mahindra & Mahindra has been

involved with defence systems since 1947 when they became importers, assemblers, and then

adapters of the iconic Willys Jeeps used in WWII. From there, they have moved into designing

and constructing their own line of armored vehicles to become the largest private sector supplier

to the government today. Mahindra began manufacturing tractors in the early 1960s for the

Indian market along with International Harvester and started as a spate entity in 1982. Nearly 50

years later, Mahindra is one of the top three tractor companies in the world with annual sales

above 150,000 and over 1.6 million tractors sold to date.

Anand Mahindra

Anand Mahindra, the current Vice Chairman and Managing Director joined the Mahindra &

Mahindra Groups steel company, Mahindra Ugine (MUSCO), as an executive assistant after

graduating from Harvard Business School in Boston in 1981. He became President and Deputy

Managing Director in 1989. When he took over the reins of the company, he spearheaded the

Mahindra Groups diversification into the new business areas of real estate development and

hospitality. In 1991, he was appointed Deputy Managing Director of Mahindra & Mahindra Ltd.

He became the Managing Director in 1997 and took on the additional responsibility of Vice

Chairman in 2003. Mahindra was a co-promoter of Kotak Mahindra Finance Ltd., which in 2003

became the first company in India to convert to a commercial bank. Today, Kotak Mahindra is

one of Indias leading financial conglomerates.

Under Anand Mahindra's leadership, the Mahindra Group has set global ambitions and

benchmarks for success. The company has grown rapidly through both acquisitions and

greenfield business development with several high-profile mergers in the past few years,

including the acquisition of Satyam Computer Services in 2009, Reva Electric Vehicles in 2010,

and Ssangyong Motor Company in 2010.


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Culture

Mr. Mahindras organization has a culture of innovation and frugal engineering which

entails figuring out how to do things effectively and at lower costs. M&M was in the process of

an incremental innovation to create a vehicle that seated 15 passengers instead of 12. In the

process, a 26-year-old product designer came up with a concept for an entirely new vehicle

called Scorpio, which has become one of Indias best-selling vehicles. This invention came

about without direction or input from management. The Scorpio was developed for $120 million;

it would have cost Ford $600 million. And, the company manufactures a Renault for 15% less

than is manufactured elsewhere.

Scorpio from Mahindra

Scorpio was a major highlight in the history of M&M. In a sense, it was for first time that they

were developing a vehicle as per the customers needs. They had conducted a market research

which indicated that there was a huge gap between the customers needs and their perception of

M&M. They used several techniques to identify these gaps and came up with the idea of

producing a world class product based on customer needs.

Since they lacked experience in in-house designing, they collaborated with suppliers from Korea

and Japan for designing Scorpio. Also they wanted to change their image, because the name

M&M was associated with farm equipment. Therefore they called the new product Scorpio from

Mahindra instead of Mahindra Scorpio. They positioned it as a car and not a utility vehicle.

With its stylish looks and competitive pricing, Scorpio gained 23% market share in the premium

UV segment in 2002-03. People started looking at it as an urban SUV. It also won many awards.

As Mahindra himself put it, ...it was also the catalyst that made the company move towards

being world-class. Suddenly we became aware that we could achieve great things.


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Globalization at M&M

Globalization has always been there in the companys DNA. The various ventures which the

company undertook in its initial years are testimony to this fact. Chrysler LLC, Dr. Beck.,

International Harvester Company, and Willys-Overland Motors were some of the companies

with whom M&M had business deals in the 50s and 60s.

In 1991, when the Licence Raj was abolished, and the doors to the Indian economy and free

trade were thrown open, thanks to liberalization, the Indian automobile manufacturers started

facing stiff competition, both from inside as well as from foreign players. However, the Indian

companies were able to withstand this competition by taking advantage of the availability of

good engineering talent at low cost. M&M was able to stay afloat during this period, which gave

them the confidence to go global. M&M worked alongside large multi-national car companies

like Peugeot, Nissan, Ford, etc.

Their idea of globalization is to have tie ups with foreign brands and building innovative

products which can be sold both in domestic as well as foreign markets. It has also acquired

many companies in India as well as in Europe. Interestingly, M&M also had plans to acquire

Jaguar and Land Rover from Ford Motors, when these brands were up for sale. Even though TataMotors ultimately won the deal, it was an indication of M &Ms plans to go global. Currently,

M&Ms utility vehicles and tractors are sold in several foreign markets. It is already exporting to

Africa, Europe, the Middle East, the US, Latin America, China and Malaysia.

M&Ms global expansion plans were quite similar to those followed by companies from

emerging economies. Usually, such companies, after tasting success in their domestic markets,

test the waters by entering foreign markets similar to theirs. This improves their confidence and

experience. Only after this do they enter the more sophisticated markets such as US and Europe.

M&M first entered Malaysia, Indonesia and Thailand with its vehicles. Only later did they

explore the developed markets.


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for manufacturing of heating, ventilating and air-conditioning systems for cars in India, Goenka

said, They had huge capacity and were looking for business. In return, we had German

engineering at Indian cost.

For Scorpio, M&M followed a low-cost model, which helped them achieve cost competitiveness.

Further, M&M has also benefitted from the low-cost model. They were able to manufacture

Scorpio at costs lower that what would have been incurred by any other car manufacturer in the

world. While the investment made by M&M for the Scorpio plant was $120 mn, the same for

any other company would have been $289 mn.

M&M entered the passenger car segment in 2005 with Logan. It was a joint venture with

Renault, a French auto company. To suit Indian markets, the Mahindra-Renault JV launched a

new version of Logan, two years later, at 15% lesser than the expected cost. They also launched

it one month ahead of the expected completion date. By partnering with Renault, M&M emerged

as a threat to Maruti Suzuki and Tata Motors in the domestic passenger car market.

M&M faced stiff competition from international players in the farm equipment sector, especially

tractors (since India is the biggest tractor market). As a result, it started taking its tractor business

to the global level, M&M started exporting tractors to Africa, Australia, China and the nations of

South Asian Association for Regional Cooperation (SAARC), which include Bangladesh,

Bhutan, Maldives, Nepal, Pakistan and Sri Lanka.

In 2008, M&M acquired a stake in Jiangsu Yueda Yancheng Tractor Manufacturing Company of

China, which helped them compete against Deere & Co. from USA, which was the largest tractor

manufacturer in the world, in terms of number of tractors manufactured. This acquisition also

helped them manufacture tractors with up to 125 horsepower. This meant that M&M could make

tractors of international standards at Chinese costs, even though 125 horsepower was quite low

compared to international standards. Material costs contribute to almost 70% of the cost of a

tractor, and M&M was able to benefit from the 5 to 20 percent price advantage on Chinese raw

materials.


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To strengthen its position in the two-wheeler segment, M&M acquired the brand and assets of

Kinetic Motors. It also bought Engines Engineering SpA, an Italian design house which

specialized in designing two-wheeler engines.

In 2009, M&M launched a multi-utility vehicle called Xylo. The aim was improve their

position in the utility vehicle market. Till then, the MUV segment which constituted 33 percent

of the UV segment was dominated by Chevrolet Tavera and Toyota Innova. M&M did not have

a presence in this segment. But with the launch of Xylo, they posed a direct competition to

Tavera and Innova.

M&M made its presence in almost all segments of the automobile industry through the launch of

Xylo and by entering the two-wheeler segment. M&M tried bridging the divide in those areas

where it was not present. M&M concentrated on innovation and developing new products by

anticipating customer demands. According to Goenka, The idea is to have such products

(trucks, scooters, cars) under our umbrella offering, without losing our focus on UVs.

Usually companies from emerging markets tend to focus more on cost-related advantages.

Innovation is not something that you find in the DNA of such companies. M&M is an exception.

According to Anand Mahindra, Once a company has paid the fees, in a manner of speaking, to

enter a sector, it becomes even harder to stay afloat.Moreover, Mahindra observed, IfM&M is

going to compete with the worlds best companies, it has to become an innovation factory.

Global Presence of M&M

North America

M&M entered USA with tractors, through Mahindra USA in 1994. Currently they sell planes to

Civil Air Patrol, an auxiliary arm of US Air Force, through their subsidiary Gippsland

Aeronautics. Other than these, Mahindra has major contracts with several large American

companies through its subsidiaries. These companies include Caterpillar, John Deere, General


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Electric and General Motors. Mahindras tech consulting arm provides services to Exxon Mobil,

shell, Motorola, Nike, etc.

South America

M&M serves South American consumers in four key areas: automotive, defense, energy, and

farm equipment.

Mahindra Reva electric microcars are sold in Central and South America along with other diesel

vehicles from the Mahindra family. They also sell armored vehicles called Rakshak to the

government of Guyana. M&Ms tractors which are calibrated for local topography and farming

functions are sold to farmers in Brazil and Chile.

Europe

Mahindra has its presence in several industries across Europe.

M&M supplies small, rugged, high performance tractors to Serbia, Turkey and Macedonia.

Europe is a large market for Mahindras Reva. Their two-wheeler consulting company, Engines

Engineering provides services to large European auto manufacturers like Bentley, Volvo, BMW,

Renault, and Ducati. Also, Mahindras other subsidiaries provide high quality parts for these

companies.

Mahindra also provides a comprehensive range of consulting services to its European clients.

Mahindra Satyam provides information and communication technology to companies in diverse

industries, and Tech Mahindra is the transformation partner for major wireline, wireless and

broadband operators including British Telecom and Vodafone.


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Middle East and Africa

M&M supplies tractors to Iran, Syria, and the United Arab Emirates in the Middle East and

Nigeria, Mali, Chad, Gambia, Angola, Sudan, Ghana, and Morocco in Africa to help mechanize

farming processes and boost agricultural productivity.

Asia

M&Ms activities in Asia include agribusiness and farm equipment, automotive, components,

consulting services, defense, energy, IT, industrial equipment, and leisure and hospitality.

They provide tractors for use in China, Sri Lanka, Bangladesh, and Nepal. In the past few years,

they have initiated two joint ventures in China to manufacture top-quality tractors suited to

Chinese farming conditions and practices.

Mahindra Reva has a significant market share in Malaysia. They sell Rakshak armored vehicles

to the government of Nepal through their defense products company, Defence Land Systems.

And in 2011, they acquired the Ssangyong Motor Company, a major Korean utility vehicle and

sedan manufacturer. Mahindra also sells automotive components to leading Asian companies.

Australia

In Australia, Mahindra has presence in aerospace, automotive, and farm equipment.

With the launch of our tractor assembly and customer support center in 2005, they established

themselves as a major player in the Australian tractor market. Also, they offer rugged multi-

utility vehicles to adventurous Australian customers.


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Exhibits

Exhibit 1: Business sectors of Mahindra


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Exhibit 2: Important Financials 2010-11


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Exhibit 3: Financial Highlights 2010-11


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Exhibit 4: Segment Results 2010-11

Exhibit 5: Scorpio by Mahindra


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Exhibit 6: Domestic Tractor Industry

Exhibit 7: Awards and Recognition

References

1. Mahindra & Mahindra - www.mahindra.com2. http://en.wikipedia.org/wiki/Mahindra_%26_Mahindra_Limited3. Mahindra & Mahindra (A): Transformation of an Indian Family Business into a Globally

Competitive Firm - Vandana Jayakumar and Vara Vasanthi

4. Mahindra & Mahindra (B): An Emerging Global Giant? - Vandana Jayakumar and VaraVasanthi

mahindra&mahindra - globalization from an indian company's perspective

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