Mahindra & Mahindra in South Africa case study presentation

2.  M&M was founded as a Steel Trading Company in Mumbai, India, in 1945
 Founders: J.C. Mahindra and K.C. Mahindra
 M&M Entered into automotive manufacturing by launching Willys, The iconic world war II jeep
 M&M had entered the India urban UV segment in 2002 with the launch of Scorpio
 The UV and Tractor platform became the company’s core competence
 They prevailed in sourcing, Product Development and Quality Control
 Products: Utility Vehicles (Uvs), Tractor, Two wheelers, Small turbo prop aircraft, and buses,
pickups, and cars
 Diversified sectors: Financial services, information technology, hospitality, infrastructure

3. Bolero pickup Scorpio
Year of Launch: 2004 Year of Launch: 2004
Target Customer Segments: Contractors, Farmers, Target Customer Segments: Urban
Service providers Consumers

4. Scorpio pickup Mahindra Thar
Year of Launch: 2006 Year of Launch: 2010
Target Customer Segments: Contractors, Target Customer Segments: Outdoor
Farmers, small Businesses Customers, Off-roaders, Retro-look
Mahindra Xylo
Year of Launch: 2009
Target Customer Segments: Taxi Operators, Ferry Owners,
Shuttle Providers

5.  The Business model followed by M&M was called “Engine Theory”
 The company mandated the “50% rule’’ for each businesses, wherein if demand fell by as much as
50%, each business had to remain profitable
 Federation of Independent companies, benefiting from both business focus & group synergies
 The parent company saw its role as an allocator of capital

6.  M&M had six assembly points outside of India and nine manufacturing plants of its own within India
 Largest Producers of tractors in the world by volume
 M&M entered the India Urban UV segment in 2002 with the launch of the Scorpio
 60% Share of the domestic UV market by value and 52% by volume
 Acquired majority stake in Ssang Yong Motor Company (Ssang yong)

7.  Most important export market for M&M
 Good fit between what the customer needs and M&Ms services
 Good fit between the price offered and the value perceived by the customers
 The Brand savviness of Black Africans provided room for automotive brands other than those from
Europe, Japan, and Korea to strengthen their brand equity so that they could lock in sales from the
growing black African consumers
 M&M(SA) saw this situation as an entry-level opportunity

8. • New Products
• Strong Recognizable Brand name
• Brand Loyalty
Strengths
• Economic crashes
• Delays in vehicle ordering cycle
• High Competition
Weakness

9. • Higher chance to spread the
reputation of the new products
• Unfulfilled customer needs
• Advancement of technology
Opportunities
• Shifts in customers tastes&
Preferences
• Trade Barriers
Threats

10. Shah’s dilemma was four fold:
 Agreement with a local vendor for contract assembly of M&M vehicles.
 Invest in its own Manufacturing Facility
 Wait & Watch until the subsidiary logged a critical mass of vehicle sales volume
 Importing CBUs from India by using South Africa as the hub.

11.  Improved margins by reducing cost of shipping CBUs
 Reduced vehicle ordering cycle
 Costs reduction
 The choice of contract assembly depended upon the:
Availability of surplus capacity
Ability to ramp up capacity consistent with changing needs
Knowledge and Technical Know-how
Financial capability and management bandwidth

12. Merits
 It will demonstrate commitment to the customers
 It will attract more sales
 Opportunity to lock in customers
Demerits
 Localization of content
 Pressure to sustain high production

13.  Using the recessionary period to become stronger and better prepared to face competition which
includes:
By reducing Fixed costs
Streamline operations
Improving Business Processes
Enlarging the reach & quality of dealer network

14.  M&M(SA) had an opportunity to develop markets in the 54 countries on the African continent
 Companies entering the African continent at the beginning of the new growth period could take the
lead in shaping industry structures, segmenting markets and establishing Brands
 This approach would help the company tide over the recession from which it was only mid-way to
recovery
 The only constraint is the higher rate of imports duty of 25% compared with local assemblers &
manufacturers

15.  The South African automotive industry accounted for about 10% of the country’s manufacturing
export's.
 Eight of the top 10 global vehicle makers.
 Three world’s largest tire manufacturers.
 More than 200 automotive components manufacturers.
 Motor Industry Development Programme (MIDP) & Automotive Production and Development
Programme( APDP).
 Low import duties under MIDP: 25% for CBUs & 20% for CKDs in 2012.
 Duty free imports to the extent of the value of exports for Local manufacturers under APDP.

16.  M&M entered South African market in February 2005
 51% Subsidiary & 49% was held by a local partner whose investments helped to finance the business
 Network of customer service outlets & Collaborations with local logistics company.
 Two Fold entry strategy:
Niche in the SUV segment
Offered Value proposition by price
 Bolero caught up with Farming and small business segments.
 Bolero was identified with ‘’Toughness”
 There was need to Build strategies for Urban Markets.

17.  The Global launch of Scorpio
 M&M (SA) bought out its local partner’s stake in August 2009
 M&M (SA) had sold a total of 11,000 vehicles in 2010
 $40.3 million turnover for the year March 2010
 1.2% market share in the pickup market & low to medium range SUV market
 M&M (SA) used different SUVs to target different segments
 It competed with Kia, Hyundai and Nissan for SUVs and with Toyota for pickups
 Player of choice in the used-car market
 Strong Loyalty for the Mahindra Brand
 Major constraint faced was the vehicle ordering cycle from India
 Volume of sales was not comparable to global players operating in South Africa

18. 50:50 Joint Venture
with Africa
automotive
investment in 2004
Created
Dealers
&
Distribution
Channels
Imported
Vehicles from
India
Launched
“Scorpio’’
Sports Utility
Vehicle
Launched XUV
500 in 2011
Different SUVs
to target
different
segments

19. Hyundai Nissan Kia
Toyota

20.  The potential role of the M&M (SA) is quite an important one for its success in the global market
 The subsidiary operating in South African region gives the company global exposure
 It attracts new markets (Other African markets), foreign clients ,new skills for the company
 Access to latest technology within the company
 Ensures quick Delivery to the customers
 Helps in diversification and increased Efficiencies
 Financial support

21.  Shah should recommend that the Board should adopt the wait & watch strategy
 The reason is that since the economy has just recovered from the financial crisis its quite difficult to opt for a
particular strategy
 The company should play safe & understand the spending patterns of the people
 It, is a fact, since Recession 2010 market has shown productive results but still the suggestion of shah should be
to play safe & secure

22. Decision Taken
According to shah:
 Africa was an opportunistic market
They were following Bottom of the pyramid products strategy where they will leverage their product portfolio,
which includes Three wheelers, LCVs, Bolero to grow further into the African market
 M&M also plans to appoint a country manager who will spearhead its fast-paced expansion plans in Africa
 Further a team of 7-8 people have deployed in some key markets in the continent
 They formed the strategy of growing through their partners who understands the local market
 Mali Assembly plant was set up by New Delhi- based export house Angelique International with support from
local government.

23. Current Scenario
 Mahindra & Mahindra South Africa has opened it’s first assembly point in South Africa.
 It sees it as a Launchpad to export vehicles to the rest of the continent
 The New modular assembly plant which imports car parts and builds the final products
 It will have the annual capacity of 2,500 pickup trucks which could be increased to assemble up to 4,000
Mahindra vehicles each year.
 It is also considering introducing its tractors into the South African market.