ASSIGNMENT—CASE ANALYSIS

SUBMITTED BY:

ANKUR SHARMA

NISHANT

SUMIT CHAUHAN

VIVEK GUPTA

ANALYSIS--PROJECT SCORPIO—The making of India’s first indigenous sports utility vehicle

M&M (initially called as Mahindra and Mohammed) was setup in 1945 in Ludhiana by K.C Mahindra and J.C Mahindra and Malik Ghulam Mohammed. After the Indo-Pak partition Ghulam Mohammed became the finance minister of Pakistan, and the M&M came to be called as Mahindra and Mahindra henceforth. The company manufactured multi utility vehicle under the Jeep brand in India, in collaboration with Willys Overland corporation, American Motors Corporation and Kaiser Jeep Corporation, all US based companies.

WILLYS JEEP

Why M&M needed to diversify its product line?

M&M was the market leader and almost monopolized the UV market till the early 1990’s. M&M jeeps where known for its high quality, durability, ruggedness, easy maintenance and operational economy in the UV market. In the 90’s M&M faced a fierce competition from Telco now known as Tata Motors after they launched a new SUV called Sumo. M&M brands were known for rough terrain and for rural areas usage. Sumo in comparison with existing M&M brands was better looking and appealed to an urban market. M&M’s market share deteriorated after Tata launched two more UV’s-- Sierra and Safari. In the year 2000, Toyota launched a new SUV-Qualis which was considered to be better looking than Sumo. Within couple of years Qualis sales were more than 50000 units. This immense competition was the cause of M&M’s stagnant sales in year 2000, listing its share price at all time low of Rs 100.

Realizing the competition, M&M decide to target an untapped segment, rather a niche segment lying between passenger’s car and utility vehicles. Scorpio was designed to be an urban UV, which combined ruggedness with comfort and aesthetic appeals. In India UV’s were generally used for commercial purpose, mainly by car rental agencies and taxi service providers. In its promotion, Scorpio was presented as non commercial SUV. The main strategy developed for Scorpio from consumer insights was that consumers want to consume premium imagery at prices affordable to them.

How Project Scorpio was incorporated?

The reason for the success of Project Scorpio was the company’s entry in the previously neglected niche market. Scorpio was built with the features of a SUV as well as that of a passenger car. Another reason for its success was the adoption of an innovative and flexible manufacturing system, which allowed the company to design and produce Scorpio according to customer’s preferences.

The pre-production phase for any product is very critical for its success. The planning is done keeping in mind all the facts that are required for the future process. M&M conducted a thorough survey of the market and customer preferences and perceptions to derive inputs for the design and features of Scorpio.

Suppliers involvement played a key role in the success of Scorpio. Suppliers from all parts of the world were given the responsibility to head the area, in which they carried their expertise. For example, Bridgestone USA for tyres, Wooshin from Korea for the Body Shop, Samlip from Korea for suspension, and Renault from France for Petrol Engines and AVL from Austria for Diesel Engines.

The company came out with an innovative sourcing system, by integrating manufacturers of various components under one big supplier, vesting all the quality control standards in the specialty of the company. This was one of the major factors that contributed not only to the desirable quality, but also lead the company into significant reduction in the cost of overall production.

Team Scorpio

A total of 120 people comprised of the team that was involved in handling the project, under the leadership of Pawan Goenka (Former General Motors Researcher). These 120 people were divided into 19 multitasking groups. the teams were given autonomy and had to take ownership of their own. The teams were made responsible for delivering quality at least cost.

Testing and validation

Before the launch of Scorpio, it was tested extensively and 74 vehicles were manufactured solely for the purpose. Testing continued for 2 years until its successful launch, in 2002.

Various testing and measuring methods such as Simultaneous Testing and Examination Process (STEP), and NOVA-C (New Overall Vehicle Audit-Customer) were implemented before the launch to test the vehicle’s Road Worthiness.

The strategy used by the company for the positioning of Scorpio was in between the passenger car market and SUV market. This, in effect caused to attract the attention of both the categories of car users. It attracted 75% of the passenger car users and 25% from the SUV users.

At the end of the fiscal year of March 2003, M&M’s total income increased by 22%, which was due to the launch of Scorpio.

The success of Scorpio was led by – effective and Integrated Marketing Communication. Ad campaigns by the base line of ‘Nothing else Will Do’ caught the attention of the targeted audience. Reasonable Pricing in the SUV category and no unexpected manufacturing defects also proved it to be attractive.

Criticism – Scorpio had to face criticism for and against it. M&M started exporting Scorpio in the year 2003 which led the crowd the question about the crash worthiness, which was mandatory as per the international law.

Few questions were also raised relating to the amount of outsourcing and collaboration with the foreign companies, questioning M&M’s capability.

Few Critics opposed the above statement by supporting the company for the successful usage of world class technology at affordable prices.

Supporters also said that vehicle integration which was done completely by M&M , was equally critical and should not be underestimated.

SWOT ANALYSIS

Strength 1.Good performance for long distances 2.Powerful player in the taxi/rental segment 3.Good presence in the rural and tier-2 cities segment 4.Maintanence cost is low

Weakness 1.Overall vehicle performance not up to competitor standards2.Low advertising and brand visibility

Opportunity 1.Increasing purchasing power and growing target 2.Leverage strong brand name by more advertising 3.Newer innovations

Threats 1.Competition 2.Government regulations and increasing fuel prices 3.Improvement in public transport

ANALYSIS—CUMMINS INDIA—Consumer Driven Modularization Strategy

Cummins India Ltd(CIL) entered the India market in the year 1962, jointly promoted by Cummins(50%) stake and Kirloskar Oil Engines Ltd(25.5% stake). The reason for entering the Indian market was that being a slowly developing country most of the diesel engine requirements were met by the imports. The company dominated the Indian diesel engine market for long with a 65% market share of the 125 KVA to 1250 KVA captive power generation equipments market.

Why Indian market needed gensets?

The main reason behind India for incorporating gensets was the growing population. The population grew at a rate of 1.6%, thus increasing the energy requirements.

The various reasons for the under capacity production of energy were:

Mainly dependence of hydroelectricity, which in turn depended on unpredictable and insufficient rainfall.

Unauthorized usage, thefts, and loss of power in transit

The other reasons for indulging in gensets manufacturing where-- voltage fluctuation at industrial and household level, savings of around 3.5 cents in large manufacturing units, reliability and quality of power.

How CIL capitalized during the recession in the Indian economy?

As the recession hit India in the early 90’s the sales of all the manufacturing products reduced, even that of CIL. Trend was shifting from manufacturing to the service industry in India. To survive in the slow economy CIL started to provide gensets on rent to customers who did not wanted to spend huge amounts of money on constructing captive power generation plant and to the newly established plants that were yet to reach their full capacity utilization levels. The gensets were slightly modified before given out for rent as per the requirement of the customer. This in effect helped CIL to get a new source of revenue and minimize the initial capital investment.

The various beneficiaries were:

Indian Oil Corporation (IOC) refinery at Guwahati by providing them five gensets of 1MW capacity.

Indian Rayon Ltd, a flagship company of Aditya Birla Group, was provide with two 1MW gensets to meet the extra requirement of low cost diesel generated power.

Lake Palace Hotel of Udaipur was provide with two 750 KVA gensets o serve as the backup to SEB,S power. The installation of the gensets was made up to the requirements asked by the Hotel i.e. its operational should be noise free and the wiring should not affect the aesthetics of the Hotel.

Ansal Plaza demanded two 320 KVA gensets to supplement their existing diesel gensets of 2100 KVA. Requirements made by the MALL: It had to be fitted on the roof top and to fulfill that CIL disassembled the gensets in various components to transfer it on the roof top and then reassemble it.

With the implication of this rental business CIL recorded a 25% increase in profit for the fiscal 2000, whereas other players in the same industry were facing heavy loses.

Why CIL needed a modularization strategy and how did they successfully implemented it?

By early 2000, India was gaining pace with the service industry. Manufacturing industry was slowing down and service industry was at a boom with 7-10% growth in next few years. But CIL was still a marginal player in the large and rapidly growing low HP market comprising small retailers, hospitals and farmers who required reliable backup in the event of power failure and shortages. So in order to cater this low end market, CIL decided to concentrate on this marginalized low HP gensets range by creating a series of low powered, modularized gensets.

In order to successfully implement the strategy, CIL added special features to their basic gensets model to fulfill the needs of different customer segments and provided in the form of ready to assemble gensets kits. For example:

Gensets were provided with dust and dirt guards to fulfill the demand of farmers to protect the bearings and increase the life of the engine.

For hospitals and hotels gensets were provided with a noise abatement hood in order to check the noise level.

Customized products come out to be expensive. So in order to make the products affordable CIL came out with a new strategy. The manufactured the basic gensets model in large quantity to bring down per unit production cost and this helped them in averaging out the extra

expenses incurred in manufacturing add-ons. The basic model was supplied to the third party distributor in ready to assemble kits and the add-on features were packed separately making the customer purchase only what they want. This came out as an win-win situation for all the parties—CIL, distributor, customer.

Clients benefited by the modularization strategy:

Café Coffee Day (CCD)—They needed uninterrupted, quality power supply to promote their trouble free coffee experience. So CIL provided them a unique ready to use design of S&B gensets which installs in quick time and minimum fuss, which can be planted at the back of the premises.

Prathma Blood Bank: They ran a mobile blood bank for which they needed the most efficient cold storage facility with absolutely no interruptions in power supply. CIL came out with X series 15 KVA gensets which met all the requirements of the bank.

CIL engineers came out with optimum gensets rating by carrying out a load mapping of residential complexes. They provided the gensets as per the requirement of the project also providing after sales service.

Future of gensets market

With increase in prices of diesel, CIL has designed gensets called Lean-Burn natural gas gensets functioning on natural gas which would comply with all the emission standards. India being an agriculture driven market would help CIL to grow in coming years. Low range and medium range gensets will also be in demand in future as India is developing fast and more and more companies are emerging in service sector.