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. Mathur

Date:4th June 2010
Outline of the presentation:-

1. Introduction of Case
2. M&M’s Vision and Mission
3. OD & Business Strategies
4. JTC
5. Feasibility Study of JV – SWOT Analysis
6. Recommendations
7. JV of M&M and JTC
8.
Mahindra & Mahindra : A to Z
•Established on 2nd Oct 1945 jointly (Mahindra & Mohammed)

J.C. K.C. Mahindra Gulam Mohammed

Mahindra
•
•Mahindra & Mohammed changed to Mahindra & Mahindra.
•
•Diversified business in other sectors such oil drilling,
bearings, times-share resorts 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

“Any Company would not remain overtime, in business that

did not have a global potential.” – Anand Mahindra.
Ø

ØEach headed by President – part of group Management

board.
Ø
ØLateral Recruitment in company.
Organizational Development: The need for Change:
Business Strategy :
In Dec 2001, company identified FES (Farm Equipment Sector)
as a core business.
• In 2002, Operation Blue Chip was implemented.
It aimed at strengthening domestic operations as a
precursor to going global.
“ GO HOME THEN GO ABROAD ”

Operation Blue Chip :-

• Replaced performance measures into two new benchmarks
Market Share Free
Cash Flow
Sales
Profits
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 :

• In 2000, 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:
Business Strategy The need forTemplate
: Globalization Change:
- Filters
• For Market Selection • For Company Selection
• Industry Filter • Product Portfolio
• Product / Technology • Product Technology
Filter • Market Reach
• Price / Earning Filter • Quality Systems &
• Processes
• • Scalability
• Attractive But Low • Openness Of
Volume Market Management
• Price Sensitive But • Liabilities
High Volume Market •

• High Tech & High hp •

Market
•
•
•
•
USA , China , Australia & Jingling
• Tractor Company
Africa ( JTC
•
)
•
 CHINA MARKET – ENTRY STRATEGY

tors were sent to China from India to test the market opportunity.

single province having large land holdings suitable for company’s 25 – 75 hp range of tract

at a price 20% higher than the rivals (John Deere), sending strong message of, “ Superior

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 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 market share.
•
• Still struggled to sustain in the market.
•
•
•
Feasibility Study of JV
 ANSOFF MATRIX ANALYSIS

Existing PRODUCTS New

Existing INCREASING RISK

MARKET
PENETRATION PRODUCT
DEVELOPMENT
Sell more in
existing Markets Sell new products

INCREASING RISK
in existing markets

MARKETS
MARKET
EXTENSION DIVERSIFICATION
Achieve higher Sell new products
sales/market in new markets
New share of
existing
products in new
markets
 ANSOFF MATRIX ANALYSIS

Existing PRODUCTS New

Existing INCREASING RISK

MARKET
PENETRATION PRODUCT
DEVELOPMENT
Highest domestic
market share of NIL

INCREASING RISK
25.9% in 2004

MARKETS
MARKET EXTENSION
DIVERSIFICATION
•Export to SAARC
No focus on, “High
•Attractive but low tech & high hp
New Volume Market market”.
•Price sensitive
but high volume
market
 Strength Weakness
ØExtended product portfolio of M&M (20- ØRestructuring of JTC.
30hp).
ØJTC - Focus on Quality SWOT Analysis ØOver head cost & surplus resources of
JTC.
ØState owned enterprise –local brand name ØLack of Efficiency in new plant layout.
readily available “Feng Shou”. ØMulti franchise.
ØTechnically skilled team of JTC readily
ØIneffective Dealership – often switched
available. to competitors.
ØGovt. Support
ØJTC global focus.
ØInfluence on manufacturing facilities
ØCultural barriers like language & food
from Ford & Isuzu who were collaborated habits.
with JTC.
ØGood Chemistry with Management & Straight
forward Mang. style
Opportunities Threats
ØCan fulfill M&M’s goal to be global ØUndeveloped Banking facility in China.
player. ØLegal considerations.
ØEasy entry to Chinese market with support
ØJTC was part of JMCG & even Ford
of local partner. holding 30% stake, so 3 companies were
ØTo export the Chinese tractors range to involved in JV.
India & Indian tractor range to China to ØDistant location of the Manufacturing
suit the demand respectively. units from the city.
ØIf M&M provided after sales services they
can be more competitive in Chinese market.
ØExpected growth of 13.2% 2004 to 2008.
ØFurther open door to US market where
FS254 of JTC was already doing well.
 Reasons for Going for JV
M & M Objective Fulfillment by JTC
1) 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 China

3) Chinese Market entry “Feng Shou” brand was popular

already.
4) Management JTC – Straightforward and
Cooperative Management.

5) Manufacturing facilities Influenced by Ford

& Isuzu

6) Company focus Quality focus & Readiness to

M&M’s quality practice.
 Recommendatio
•Process of JV – JV agreement,
securing approval of company name,
ns
( Star Fish
business license.
Analysis )
•Asset transfer contract.
•Protocol for takeover of plant equip.,
inventory, land & building. •Training of the employees
•Finalizing contracts with suppliers •Improve the existing accounting and
and dealers of JTC. costing system.
•Game Changer – After Sales •Mapping skills of employees.
Services.
•Restructuring.
•Improve Over head cost.
Start Keep Doing
Doing
Stop Doing More
ofof the Chinese & Export
•Study
market.
•Entry through Green Less Of
field projects. •Establishment in Chinese market.
•After Sales services.
•Hi-tech & High HP
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.