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Strategy Implementation Course Project
- Globalization of Mahindra
A Report by Group 7, Division D, MBA Core 2014-16
D037 – Karishma Mehta
D038 – Ronak Mehta
D039 – Tanmay Mhapsekar
D040 – Amit Mirchandani
D041 – Priyadarshi Mishra
D061 – Rahul Tiwari
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Table of Contents
Mahindra Rise ................................................................................................................................... 1
Strategy Executed ............................................................................................................................. 1
Organic growth strategy ............................................................................................................... 1
Mergers and Acquisitions ............................................................................................................. 1
Future Targets................................................................................................................................... 2
Competition ...................................................................................................................................... 2
World’s Most Admired Global Companies ........................................................................................ 2
Analysis of Mahindra’s Current Global Scenario ............................................................................... 3
Financial Position .......................................................................................................................... 3
Brand Equity ................................................................................................................................. 4
Leadership .................................................................................................................................... 4
The Resilience to Rise ................................................................................................................... 4
Application of Strategy Implementation Concepts ........................................................................... 5
AAA strategy adopted by Mahindra .............................................................................................. 5
Rooted Maps Analysis ................................................................................................................... 6
Cultural Elements while going Global: .............................................................................................. 7
Strategies for Global Managers ........................................................................................................ 7
Key Focus Areas ................................................................................................................................ 7
Appendix .......................................................................................................................................... 9
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Mahindra Rise
Mahindra’s core purpose is “We will challenge conventional thinking and innovatively use all our resources to drive positive change in the lives of our stakeholders and communities across the world, to enable them to Rise.”
This is the guiding thought behind the global movement of Rise across all its business verticals. For Mahindra, 'Rise' means achieving world class standards in everything they do, setting new benchmarks of excellence, and conquering tough global markets.
Since its inception Mahindra has made a positive impact to the lives of people through effective but responsible business practices. Mahindra’s commitment to sustainability rests upon the group’s core values which are:
 Professionalism
 Good corporate citizenship
 Customer first
 Quality focus
 Dignity of the individual
These core values are something which are inherited form Mahindra’s management team, especially the group’s Chairman and MD, Mr. Anand Mahindra who believes that “Humility is one of the most important things that will take you to the top.”
Strategy Executed
The Mahindra group has adopted the dual strategy of growing through both organic and inorganic means which has proved to be quite effective resulting in its EBITDA seeing a 19% CAGR in the last decade.
Organic growth strategy
 Strengthening the product portfolio: o Many variants in the tractor segment are introduced o Mahindra TUV 300 to be launched this year o Three new entrants planned to hit the domestic market by 2016 (a new value for money hatchback, a big 4 row utility vehicle and a compact SUV)
 Refreshing and updating existing products o The next generation model of the SUV Scorpio was introduced with a 140 bhp motor o The head of automotive division of Mahindra, Pawan Goenka commented on the expected future performance of the new Scorpio facelift and said, “The car will remain a success only if it generates impressive outcomes consistently for at least a few more years from now, till we are satisfied of success, which is never!”
 Strengthening R&D and technological capabilities
 With increasing concerns over global warming and the need for sustainable mobility, the Mahindra group will focus and invest in development of alternate fuel technologies
Mergers and Acquisitions
 Around 60+ acquisitions in the past 7 years
 Some of the major acquisitions are: o Acquired a 33% voting stake in Japan based Mitsubishi Agriculture Machinery Co. Ltd, this new partnership will help both companies to jointly develop products to address global opportunities in the tractor and agri-machinery space (2014) o Korea’s Ssangyong Motor Co. and Reva Electric Car Co (2010)
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o Satyam Computer Services Ltd, Australian aerospace firms Aerostaff Australia and Gippsland Aeronautics (2009) o Kinetic’s 2-wheeler business and Yancheng Tractor’s Huanghai, a Chinese tractor firm (2008) o Punjab Tractors Ltd (2007)
Future Targets
 To make “Mahindra” one of the 50 most admired global brands by 2021
 To make the businesses firms we own, billion dollar brands
Competition (seen from Globalization perspective) Parameters M&M Tata Motors Amtek Auto
1) Vision/ Purpose / Mission We will challenge conventional thinking and innovatively use all our resources to drive positive change in the lives of our stakeholders and communities across the world, to enable them to Rise. To be passionate in anticipating and providing the best vehicles and experiences that excite our customers globally.
To become a world class engineering company in the Automotive and Non-Automotive sector. This is to be achieved by capitalizing on our superior technology base for the benefit of our customers, suppliers and stakeholders.
2) Presence in countries
More than 100 countries
Operate in more than 175 countries Presence in more than 30 countries
3) Percentage of revenues coming from Global Operations
33% of revenue comes from global operations 85% of revenue comes from global operations (mainly because of JLR) 43% of revenue comes from global operations
4) Major global M&As a) SsangYong Motor Company b) Stokes Group Limited, UK c) Jiangling Tractor Company (JTC) in China d) Joint venture with Renault & Nissan a) Jaguar & Land Rover b) Daewoo’s truck manufacturing unit c) Joint venture with Marcopolo of Brazil
a) Zelter GmbH
b) GWK Amtek Limited
c) Midwest Mfg. Co. USA
d) Lloyds (Brierley Hill) Limited
Table 1: Comparison of Mahindra with other conglomerates competing in the global space
World’s Most Admired Global Companies
On the lines of Mahindra’s Big Hairy Audacious Goal of cracking the 50 most admired global company, we studied Fortune’s recently released World’s Most Admired Companies 2015 list. Apple is again ranked the #1 most admired. Rounding out the top 10: Google, Berkshire Hathaway, Amazon, Starbucks, Walt Disney, Southwest Airlines, American Express, GE, and Coca-Cola.
An excerpt from Fortune’s website: “What becomes a reputation most? Healthy financials and stock performance, for starters. This year four companies have landed on the 50 All-Stars for the first time—
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Chipotle, CVS Health, Salesforce.com, and the financial services giant USAA, which at No. 29 is this year’s strongest debut. But not all companies fared as well. Consumer criticism and a change in leadership caused McDonald’s to slip to No. 46, its lowest rank in the seven years it has appeared in the top 50, and a hacking scandal and public stumbles resulted in Target dropping to No. 48”
Another research published by Millward Brown on the Top 100 Most Valuable Global Brands 2015 describes how top brands build such value. It also emphasizes on the greatest brand value growth coming from Asia this year and the dominance of technology indicating a lot about the future of brand building over the next 10 years. It highlights 10 action points for building and sustaining valuable global brands listed as follows:
1. Innovate and Delight 2. Be meaningfully different
3. Stand for a purpose 4. Walk the talk
5. Build & maintain trust 6. Renew improve the brand experience
7. Rely on consumer insights 8. Think holistically
9. Get noticed 10. Keep changing
From this we learn that Mahindra must focus on healthy financials, customer centricity, brand values and strong leadership; and leverage on technological advancement, innovation, brand trust and the Asian growth potential.
With just one Indian brand (Tata Group) featuring on BrandFinance’s Global 500 2015 list, it is clear that Mahindra has an uphill task at hand to achieve its global aspirations. We present our group analysis on Mahindra in more detail below.
Analysis of Mahindra’s Current Global Scenario
Today Mahindra and Mahindra Group is a $16.9 billion global corporation employing more than 200,000 people across the globe. It is world’s largest tractor company in terms of volume sold. It is Market leader in SUV/Pickup segment in India with a market share of 37% as of March 2015.
Financial Position
We studied Mahindra’s financial strategy by analysing its financial position by comparing its profits earned through its Indian arms vis-à-vis its foreign subsidiaries. As we can see in the graph below there is a loss of Rs. 0.5 from global operations for every Rs 1.5 earned by the domestic operations.
To deep dive into where the losses are coming from, we analysed the foreign operations to discover that the major losses are coming from the foreign subsidiary Ssangyong Motor Company which account of about 22% of consolidated revenue. Also, there was a component intercompany adjustments which was realized this year which caused major losses.
(The detailed excel sheet of our group analysis is attached as an annexure to this report)
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Also, to find out the sources of cash, we analysed the cash flow statement, where in we found that the Y-o-Y cash generated from operations has improved considerably. The investments remain almost constant and also lesser cash is raised from financial instruments, thus the cash flows have become more sustainable.
Figures in Rs. Crores
To see further details of the analysis please refer to Appendix and Excel Sheet in Annexure
Brand Equity
The Brand valuation for Mahindra brand stands at $2.27 billion for FY14. In the past few years, the Mahindra Group has diversified on many fronts. Its presence in North America, South America, Europe, Middle East & Africa, Europe, Asia and Australia led by organic and inorganic growth speaks for itself. It has 10 business sectors with a presence in various sectors and a common identity Mahindra Rise. It keeps on building the brand and channel in focused markets. It continues to strengthen its global footprint with a focus on the key markets in different geographies through the resilience to rise.
Leadership
The years 2001-2002, were very low periods for the company. The stock price was tumbling. Anand had full belief in the project of the SUV Scorpio, and drove everyone together with him in this belief, playing the cards well and coming out a winner in this gamble. Scorpio made positive impressions on the company's growth and came out as a well-judged risk. Many define this as a turning point in the career of Anand Mahindra and for the entire Mahindra group and there has been no looking back
With Anand Mahindra taking the seat of the Chairman and MD in 2012, the stock prices have doubled in the last 3 years. He is a major force behind Mahindra’s Rise.
The Resilience to Rise
Dwelling strongly on the importance of resilience, Mahindra compared the flagship company of the group with the bamboo, saying it has shown the same characteristics in the face of difficulties witnessed through the year.
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Application of Strategy Implementation Concepts
AAA strategy adopted by Mahindra
Adaptation strategy: -
 Variation strategy:
The products Mahindra delivers to rural and agricultural areas are designed for high performance in local conditions. The tractors they sell to farmers in Chile and Brazil are calibrated for local topography and farming functions, and their Powerol diesel generators ensure uninterrupted power supplies in areas with unreliable electric grids
 Externalization strategy: o Strategic alliance - Mahindra and Mitsubishi Heavy Vehicles to Form Strategic Alliance in Agricultural Machinery. Mahindra & Mahindra Ltd and Mitsubishi Heavy Industries, entered into a Strategic partnership in the agricultural machinery field. Mahindra & Mahindra has signed a definitive agreement to acquire 33% of shares of the MHI subsidiary, Mitsubishi Agricultural Machinery (MAM). The Strategy Priorities were namely, Global Growth, Synergy between the two companies, and Collaboration on technology development.
 Innovation strategy:
Mahindra Reva Electric Vehicles Pvt. Ltd., a part of the US $15.9 billion Mahindra Group, has been featured in the prestigious ‘Fast Company’ magazine listing of the Top 50 Most Innovative Companies of 2013. Mahindra Reva was ranked at number 22 for its innovative contributions to the global electric vehicle industry. Today Mahindra Reva has one of the world’s largest deployed fleets of electric cars – customers in 24 countries have driven their Reva’s petrol-free for over 180 million kilometres. The company produces its own cars, licenses out its electric vehicle technologies, electrifies existing platforms, and helps to deliver integrated zero-emissions mobility solutions.
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Arbitrage strategy:-
Leveraging their longstanding base of more than 500 vendors from their automotive and tractor divisions, they are able to offer their clients reliable and low-cost sources. They follow a ‘cost up’ model rather than ‘price down,’ so that their clients benefit from low production costs in India. Their range of services includes sourcing strategy; identifying, evaluating, and selecting vendors; negotiating long term contracts with vendors; complete support for part development, quality, pricing, logistics, and delivery; aligning vendors with their clients’ specific quality process guidelines; and more.
Strategy followed by Mahindra (Mixture of adaptation and arbitrage):
Given the company’s current sentiment towards globalization, it makes more sense for Mahindra and Mahindra to focus on adaptation strategy more than aggregation or arbitrage. With their vision to global across most of their business verticals, adaptation strategy is aligned with their businesses long term plan and expectations. However, the nature of their certain businesses like the IT outsourcing business of Tech Mahindra and their contract sourcing business for many of their businesses like automotive and tractor divisions, auto parts etc. make them to follow the arbitrage strategy as well. So, from a company perspective as a whole they will follow a mixture of adaptation and arbitrage strategy.
Rooted Maps Analysis
As per rooted maps, the first map takes a general perspective by sizing countries according to their share of India’s international trade. In the FY 2014-15, India exported maximum to USA and UAE with shares of 13.66% and 10.63%. Next in the list in the order of export share were Hong Kong, China, Saudi Arabia, Singapore, U.K, Germany Sri Lanka and Bangladesh.
For the second map, as an industry we have decided to take the global automotive market. Growth in China has slowed even though investments by OEM’s continue to ramp up. Sales have plunged in South America. North America is enjoying robust forecasts of 16 million cars. Europe is weaker as the region is emerging from a six year slump. Sales have plunged in Russia.
Mahindra’s global presence means you can find Mahindra vehicles on the roads—both paved and unpaved—of Australia, Europe, Latin America, Malaysia, South Korea, and South Africa. And they are seeking out new terrain every day.
We can conclude over here that geographical distance is not much of a barrier for Mahindra due to their significant presence in North and South America. In the current environment of protectionist
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rumblings and highly assertive governments, administrative and political distances seem to be increasing. These distances could be the reason due to which they have not able to venture into several markets.
Cultural Elements while going Global:
While going global, Cultural Quotient plays a major role. Few initiatives taken by Mahindra group are:
1. Global Recruitment:
Mahindra Group has been recruiting graduates from top American Universities and are asked to work in India for two years. These global recruits improve cultural fluency and bring fresh perspectives to the table that globalize the group outlook. It will help gain knowledge about how cultures are similar and how they are different and other important values, social interaction norms, beliefs, gestures.
2. Three Cultural Pillars:
The philosophy of Rise and its three cultural pillars have got a buy-in from employees from all the nations across the group. The first pillar is a mindset that says we accept no limits, the second is that of alternative thinking leading to innovation, while the third creates positive change within the organisation and in the ecosystem.
3. Shadow Boards:
Anand Mahindra added a new circle in the organization structure of Mahindra companies to give young managers a voice at the highest levels of decision making which was called ‘Shadow Board’. Young managers across all the verticals and different regions were asked to form committees and suggest recommendations. Some of the recommendations made by the Mahindra shadow boards have found their way into the group's business.
Strategies for Global Managers
Mahindra group has programmes on cross-cultural sensitivity and global thinking. Global managers or leaders move across geographies. They need to have an open mind where they are always learning and trying to understand others.
Applying Hofstede’s Framework:
1. Individualism V/s Collectivism (The degree to which individuals are integrated into the groups): Global Recruitment drives and cross-cultural sensitivity programmes suggest that Mahindra group believes in Collectivism.
2. Uncertainty Avoidance: Mahindra Rise’s three cultural pillars encourage low uncertainty avoidance as it motivates its group to accept unstructured situations or changeable environments and provide alternative thinking leading to innovation.
3. Power Distance: Mahindra nurtures a culture that endorse low power distance by accepting consultative power relations as seen in Shadow Board Initiative.
Key Focus Areas
The Mahindra group is taking strategic steps in its journey to become a globally recognized force by focusing on some key areas mentioned below:
1. Launch of new products and refresh existing versions: The Mahindra Research Valley, Chennai of Mahindra and Mahindra group is focusing on new technology and product programs. This includes two new passenger utility vehicles platforms. It is also working on refresh versions of existing products. Mahindra is also working on joint developments with Ssangyong Motors, Korea, for a new engine family with both diesel and gasoline fuel options.
2. Building Capacity: Building adequate capacity for the future has always been very important for Mahindra and Mahindra. It signed a MoU with the Government of Maharashtra to invest an additional Rs.
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4000 crore over a 7 year period in Chakan, to build additional capacity. It also augmented its capacity at Zaheerabad plant in Telangana.
Electric Mobility: Mahindra and Mahindra believes in the future of electric mobility and considers it as an essential key focus area. It is developing battery operated Electric powertrains and electric vehicles at Mahindra Reva Vehicles Private Limited, one of its subsidiary.
Managing multiple cultures and geographies: Mahindra and Mahindra has been expanding its horizons continuously by venturing into new geographies. Mahindra USA, a subsidiary of Mahindra, recently crossed 15,000 annual volume mark, which indicates how well it has managed different culture and geographies.
Mergers, Acquisitions, Joint Ventures: Mahindra is focusing on expansion through integrations. It has a presence in more than 40 countries. It recently entered into an agreement to acquire a 33% voting stake in Japan based Mitsubishi Agriculture Machinery Co. Ltd. This kind of partnership will help it to address global opportunities and expand further.
Supply Chain dynamics: Mahindra and Mahindra believes in building effective supply chains that enable them to adapt to changing conditions, seize opportunities, and achieve high performance. It has Green Supply Chain Management policy. Its subsidiaries or Joint Ventures have their own policies which are in guidelines with the company’s supply chain policy. It owns Mahindra Logistics Limited (MLL), a wholly owned subsidiary, which specializes in supply chain management.
Automotive Sector: The industry has seen partial recovery in FY15. The auto industry is likely to show positive growth rate on the back of economic outlook, new launches by Original Equipment Manufacturers and investment in roads and infrastructures. The government in also keen to support its development.
Farm Sector: The market for tractors and farm equipment is expected to grow in the long term. With different governments supporting for agriculture, rural, development and improved agriculture practices, the farm sector is expected to do well and remains a key focus area.
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Appendix
Analysis for Mahindra and Mahindra in the Indian and Global context:
Indian
The Automotive and Farm Sectors, along with their subsidiary companies and joint ventures, achieved aggregate global sales of 860,557 vehicles and tractors (601,900 vehicles and 258,657 tractors). Mahindra and Mahindra sold 464,850 vehicles (a decline of 8.3%) and 234,766 tractors (a decline of 12.6%) in FY15.
Mahindra and Mahindra maintained its position as the 3rd largest Passenger Vehicle Company and as the 2nd largest Commercial Vehicle Company in India. Its share of the total Indian auto industry stood at 11.6%. The demand for two wheelers and three wheelers also declined. The net income of the company for the year FY15 was Rs. 39,794 crores, a decline of 3.5% and the PBT of Rs. 4,169 crores, a decline of 4.6%.
Global
The Automotive Sector of Mahindra and Mahindra exported a total of 30,196 vehicles during the FY15, a growth of 1.8%. The Scorpio continues to take the largest share of the exports, followed by the Bolero; the XUV500 performed well in South Africa and Chile. During the FY5, Sri Lanka, Nepal, Bangladesh, Chile and South Africa continued to be significant overseas markets for Mahindra and Mahindra. There was good growth in exports to Sri Lanka, Nepal, Bangladesh, Bhutan and various countries in the African region; exports to South Africa and Chile saw a decline.
Mahindra and Mahindra achieved a milestone of exporting the highest number of tractors from India. Exports from India stood at 13,746 tractors, a growth of 35.5%.
Mahindra USA, a subsidiary of Mahindra group, crossed the 15,000 annual volume mark for the first time, achieving its highest ever billings and retails.
China’s tractor Industry shrunk by 17% over the previous year. The Mahindra Yueda Yancheng Tractor Company Limited (MYYTCL) sold 11,710 units in the domestic market, as compared to 19,042 units sold in the same period last year.