Company

LOGO Farm Mechanization Sector: Company analysis: Mahindra and

Mahindra Limited

Presented By

Pankaj K Bhaisare

Contents

2

Introduction of Mahindra Group 31

Mahindra and Mahindra Farm equipment division33

SWOT analysis, Five forces analysis5

Vision, Mission and core Values34

Value proposition and Value chain in India6

Tractor industry in India

Introduction of Mahindra Group

Large industrial conglomerate in India

The company was set up in 1945 in Ludhiana as Mahindra & Mohammed.

Founders: brothers K.C. Mahindra and J.C. Mahindra along with Malik Ghulam Mohammed.

US $15.9 billion multinational group with more than 155,000 employees in over 100 countries across the globe.

Leadership in utility vehicles & tractors in Indian market

On April 2012, top 5 companies in group are Mahindra and Mahindra ltd. ( $ 8.41 billion), Mahindra Satyam ( $ 1.86 billion), Tech Mahindra ltd. ( $1.81 billion), Mahindra and Mahindra Financial Services ltd ( $1.40 billion) and Mahindra holidays Resorts India ltd. ( $ 0.49 billion)

Diversified operation span in 18 key industries in 10 sectors.

Group DiversificationFinancial Service Sector Financial servicesInsurance Broking Rural Housing Finance

Systech Sector Aerospace Components Steel Consulting

Two wheeler Sector Two wheelers

Aftermarket Sector Used car purchase and sales service

Defense Sector Defense

Automotive and Farm Sector Automotive Farm equipments Agri –business Energy Construction equipment

Information technology Sector IT

Mahindra Partners Steel Retail Industrial equipment Logistics leisure boats Solar energy

Infrastructure and reality Sector Infrastructure Real estate

Hospitality Sector Hospitality

Vision and Mission Statement and some financials of Mahindra Group

VISION:“To create a fully collaborative environment in which suppliers can deliver exactly what the company needs, when it needs it, and at a competitive cost.”

MISSION: “To create India's largest automobile and automobile-related products distribution network by providing dealers and customers with the largest choice of unique world-class products and services.”

Financials of Group:

Indian Tractor Industry

In financial year 2012, Indian tractor market recorded sales of 5,35,210 tractors compared to 4,80,377 tractors in previous year , recording a growth of 11.4%

India’s current tractor penetration is estimated at ~20 tractors per 1000 hectares of agricultural land.

Fig: Trends in yearly tractors sales volume ( domestic + Export)

Mahindra and Mahindra Limited

Among the top three tractor brands in the world

Sales 200000 tractors annually. They sold 1.75 million tractors worldwide.

The first tractor company globally to win the Deming Application Prize in 2003

The first tractor company worldwide to win the Japan Quality Medal in 2007

It is ranked 21 in the list of top companies of India in Fortune India 500 in 2011

Business model: Wholly owned, joint venture and franchise

Value proposition: high quality, focus on customer, individual dignity, transparency and trust.

Cont’d…

Operation: operates in 40 countries in 6 continents.

It manufactured tractors and farm equipments at four plants in India, two in China, three in the United States, and one in Australia.

It has three major subsidiaries: Mahindra USA, Mahindra (China) Tractor Company, and Mahindra Yueda (Yancheng) Tractor Company (a joint venture with the Jiangsu Yueda Group).

Supplier to dealer whole process is integrated with IT, use of MIS, ERP, pull-based production and Supply system, timely procurement of raw material, selection of dealers and employees management.

Distribution: local dealers

Cont’d…

Products :

Tractors Tractors ranging from the 15 HP engine to 85 HP. Sales under name Arjun, Bhoomiputra, Sarpanch, Shaan, Yuvraj and

Swaraj series for Indian Market. FengShou series for China Market Huanghai Jinma tractors series for Europe and USA.

Farming Implements: A) Crop Harvesting Solutions : self-propelled wheel harvester and

Crawler paddy harvester . B) Rice Planter C) Cane Thumper and Detrasher for Sugarcane

region specific product for Australia and US.

Cont’d…

Promotion:

a) Advertisement on TV, newspaper, magazine and radio.

b) Promotion campaign near public place like temple, market place.

c) Field demonstration d) Providing financial assistant in collaboration with

banks and co-operatives

Pricing: largely for medium and large farm land holder but new they target small

farmers also. Low price as compared to competitors.

Positioning: business leaders, innovative, global potential, financial returns

CSR: Employee Social Options (ESOPs) volunteers create health, education and

environment awareness. Sponsoring sports and cultural events.

Competitors: TAFE, Eicher, Escort, JD, Sonalika, HMT, Others

Mahindra and Mahindra Limited:

The net revenue coming from farm equipment division is 36.6 % i.e. 13615 crore ( $3.37 billion)

Mahindra and Mahindra Ltd. In India

No. 1 tractor brand in India, since 1983, with a domestic market share of around 42%

Economy: Agriculture base economy.

India has 62 % marginal farmers, 19 % small, 18 % medium and 1 % large farmers.

Growth in farm mechanization due to labor scarcity.

Credit availability: 95% of tractor sales are on credit.

higher national income growth may boost demand for a firm's products

Polity: Government laid stress on the mechanization of agriculture with a view to boost food grain production.

Subsidy on agricultural loans from government

Change in taxation policy

100% FDI policy

DemographyDiversity in land holding and cropping pattern. Regional variation in farm mechanization practices.

Vision, Mission and goals of Mahindra and Mahindra farm equipment division

Vision:“To be the undisputed leader of world automobile and farming equipment industry.”

“ Farm - Tech Prosperity”

Mission:“To provide best value for money to customers through best quality and most cost effective products and services.”

Goals:

To provide highly technological innovative product By 2015 it wants to enter almost all continents of world to make the production system even more efficient To usher prosperity; for its customers, dealers, employees, society and all other stakeholders.

SWOT

Strength one among top three playerStrong brand name with market share of 42 % in Indian tractor business. Strong relationship with dealers Strong supply chain with new technologies. Product development ability.The parent company has its own Infrastructure Company, IT Company and Financial service company. Huge distribution channel in rural, urban and semi urban area huge product range and strong R&D . The team of >600 engineer pushes technology forward. High investment capacity Diversified business

OpportunitiesGrowing economy and improved farm practices. Increase in farm mechanization due to labor scarcity. Emerging market because only large and medium farmers use farm machinery. Huge market potential. penetration of tractors is 20 tractors per 1000 hectares of cropped area Increase in credit availability Technological innovation Government support for farm mechanization High export potential due to low cost of manufacturing. ( exported 13722 tractors)

WeaknessesThe company is highly dependent on the rural sectorLess technological ability as compared to Foreign playersLow labor productivity

ThreatDependency on rural segment and monsoon Farm land fragmentation Entry of foreign players Increase in diesel prices reduce tractors sales Development of technically superior new model Government policies (Subsidy)

Competitiveness- Five forces analysis

Rivalry : Existing competitors TAFE, Eicher, Escort, JD, Sonalika, HMT, OthersUnconcentrated and competition is more. competition on cost and quality.Economy of scale and continuous technological innovation create entry barriers.

Bargaining power of Buyers: 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 Hence buyers power is high.

Bargaining power of Supplier:

Though steel forms a major inputs , the farm equipment 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 supplier power is less.

Threat of Substitute: The firms major product is tractor. very less substitute for tractors likes bulls and power tillers but have very low performance. The tractors produced by competitors have high price.Hence less threat of substitute

Threat of New entrants:High investment and economy of scale by mergers and acquisitions. Highly integrated dealers network. It restrict the entry. Hence threat from new entrant is less.

Value Proposition in India

QCIT: Quality (Standard), Customer (focus) , Individual dignity (employee), transparency and trust (employee and customer).

USP – Ruggedness and performance. Value –

Good Corporate Citizenship Seek long term success, in alignment with the country's needs, without compromising

ethical business standards Professionalism

Seek the best people for the job and giving them the freedom and the opportunity to grow

Support innovation and well reasoned risk taking, but will demand performance Customer First

Respond to the changing needs and expectations of the customers speedily, courteously and effectively

Quality Focus Make quality a driving value in the work, in the products and in the interactions with

others Believe that the quality is the key to delivering value for money to the customers

Dignity of the Individual Value individual dignity, uphold the right to express disagreement and respect the time

and efforts of others Nurture fairness, trust and transparency through actions.These values become the compass that will guide both personal and corporate actions of

the group

Strategy Diversification of business as well as products: Automobiles and Farm

equipments. Different agricultural services in input, finance and IT also provided by subsidiary of parent company.

Place: Production plant operate in India, China and USA. In India target rural farming population.

Distribution network: Distribute product through local dealer network.

Products: Different series of tractor with different names ranging from the 15 HP engine to 85 HP. Rice planter, Sugarcane thumper and detrasher.

Price: low as compared to other competitor due to economy of scale.

Promotion: Through TV, Newspaper and magazine advertisement, sponsor local events and sports, arrange promotion campaign and field demonstration.

Technology: Production, Forecasting, account management (ERP), Data management (MIS), Orders fulfillment.

Management: Skilled employed own hired, Joint venture.

Mahindra and Mahindra value chain:Firms infrastructure: Owned manufacturing plant in India and Joint venture for manufacturing in foreign countries. High investor equity fund.

Human Resource Management: Recruit skilled people from reputed institute. Trained them and provide appropriate compensation according to their work.

Technology development: New innovative product design, Use of MIS, ERP, monthly forecasting.

Procurement: Procurement of raw material from identified suppliers by making contracts, Advance machinery imported form foreign countries.

Inbound logistics Identified suppliers economy of scale purchase Suppliers agreement ( one subsidiary of parent company also supplier) Just in time order and delivery. Use Supplier Kanban system. Maintain some inventory. Road Transport use trucks. A GSM based tracking system wasImplemented to track the trucks.

Operations Production plant : the Area-wise, model-wise, week-wise sales forecasts Total quality management system monitored by skilled engineers. ERP use for order and inventory management. MIS use for collecting data and forecasting demand. According to demand assemble the tractor part and deliver.

Outbound logistics It deliver tractor from manufacturing plat to companies SKU and dealers SKU on the basis of demand. Information system for tracking order information. Keeping finished good inventory record. Give information to plan manufacturing process to manufacturing plant

Marketing and sales: Product : - affordable tractor and farm equipments.-Standard design of tractors and farm equipments. Price: Tractor : according to power 15 Hp to 85 Hp. Farm equipment: low compared to competitor. Place: local dealer showrooms promotion: through add and campaign.

After sales services: Mahindra service stations provide maintenance servicesInformation about tools and farm equipment Register complaints.

Core competence

Quality:Product development according to standardTotal quality management system to ensure quality.

Customer focus: Design products according to customer need through consultation and feedback. Response to changing need and exception of customer speedily.

Individual dignity: Respect the time and efforts of all employees and treat all employees same. It helps to retain employees.

Transparency and trust: They expand the business without compromising ethical business standards. Transparency in transactions with suppliers and customersDevelop trust among customer by providing standard product and affordable price.

Sources of sustainable competitive advantages:Operations: Economy of scale in operation helps to reduce cost. Total quality management system Use of Kanban to manage suppliers. Integration of supply chain with IT i.e. ERP, MIS to manage and communicate. Use GSM for tracing material delivery. Firm Infrastructure: Strong financial resources Technology innovations Brand image

Recommendation

Marketing Recommendations: Focus on 41-50 hp segment tractors with new improved design which can

work in hard field. Develop in-house credit lending facility (lending through parent

companies subsidiary at low interest rate on time with easy procedure.

Focus on Channels Ensure higher distributor margins and increase distribution network Implement custom hiring model: 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 -platform for the farmers.

Expand geographically Diversify Tractors - Monsoons correlation: Tractor sales, as already seen,

are driven by monsoons. A bad 3-months monsoon season generally translates into large inventories. Geographical expansion would help diversify tractors sales ± monsoon correlation, thus bringing down inventories to free up locked-up capital.

Conclusion

India is growing economy. Farm Mechanization in India is still in its early stages. The company Mahindra and Mahindra having more opportunities to grow due to high investment capacity, Huge market capture and strong brand name. The competition from rivals is more, low threat of new entrant, less bargaining power of supplier and high bargaining power of buyer restrict the growth but operational competitive advantages and core competence helps to achieve the goals of company leads near mission and vision of company.

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