Mahindra Grp7 SecB SM1

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Group 7, Section B Anubhav Mishra FPM14009 Nishanth A PGP29096 Medha Joshi PGP29097 Aditi Gupta PGP29113 Arun Bharadwaj PGP29109
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strategic management

Transcript of Mahindra Grp7 SecB SM1

Group 7, Section BAnubhav MishraFPM14009

Nishanth APGP29096

Medha JoshiPGP29097

Aditi GuptaPGP29113

Arun BharadwajPGP29109

ContentsCompany Profile1Core Purpose3Core Values3Awards and Global Recognitions3Segmentation and Scope of Study4Sports Utility Vehicles4Industry Background4Generic Strategies Analysis5External Analysis (PESTEL)6Political7Economic7Socio Cultural8Technological8Environmental8Legal9Internal Industry Analysis (Porters Five Force Model)9Threat of New Entrants10Bargaining Power of Suppliers10Bargaining Power of Customers10Threat Of Substitutes10RIvalry In the Industry10Value Chain Analysis11Primary Activities11Inbound Logistics11Operations12Outbound Logistics12Marketing and Sales12Service13Secondary Activites14Firm Infrastructure14Human Resource Management14Technology Development14Procurement15Resource Based View Analysis15Tangible Resources15Intangible Resources16Corporate Level Strategy16Tractor And Farm Equipments18Internal Industry Analysis (Porters Five Force Model)18Threat of New Entrants18Bargaining Power of Suppliers18Bargaining Power of Customers18Threat Of Substitutes19RIvalry In The Industry19Factorsaffecting the choice of tractors19

Company ProfileMahindra and Mahindra Ltd (M&M) was incorporated in 1945 as steel trading company. M&M is the flagship company of the Mahindra group. It started its operations by assembling jeeps imported in a semi-knocked down condition from Willys, US. M&M is among the leading tractor manufacturers in the world and is the market leader in utility vehicles (UVs) in India. It has presence in diversified business segments viz. automobiles, tractors, financial services, telecom, software, infrastructure development, auto components and hospitality. These businesses account around 93% of the top-line of the consolidated company. The project report will focus only on the automotive sector and operations. At present it is a US $16.7 billion multinational group with more than 180,000 employees in over 100 countries across the globe. In January 2011, the Mahindra Group launched a new corporate brand, Mahindra Rise, to unify Mahindra's image across industries and geographies. Mahindra group has stated that their aspiration is to be one of the top 50 most admired global brands by 2021. Mahindra has also made the major acquisitions of Reva Electric Car Company, now known as Mahindra Reva Electric Vehicles Private Limited and bought 60% stake in the SsangYong Motor Company (SsangYong Motor) of South Korea.

Figure 1: Mahindra Group Diversification ProfileThe automotive group forms the 58% of total revenues and 40% of total profits.

Figure 2: Mahindra Group Revenues and Profits

Figure 3: Mahindra Group Revenue and Profits by Business Sectors

Core PurposeWe 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.Core Values Professionalism Good corporate citizenship Customer first Quality focus Dignity of the individualAwards and Global Recognitions

Mahindra and Mahindra has received numerous awards and recognitions at India and Global levels. Some of them related to the segments in focus of this study are given below. The only Tractor Company in the world to have been awarded the Deming Prize and the Japan Quality Medal One of Forbes Global 2000 most Powerful Companies of the World One of Indias top 10 Thought Leaders in the Thought Leadership Index published by TLG, UK Financial Times-Arcelor Mittal Boldness in Business Award 2013 in the Emerging Markets category Mahindra Reva in the top 50 Most Innovative Companies of the World in the Fast Company ranking, 2013Segmentation and Scope of Study

As we have explained in the company profile section, that Mahindra Group is much diversified and operates in different sectors and segments. For the purpose of the study, we have done the further segmentation as given below: Mahindra Automotive Passenger Cars Sports Utility Vehicles (SUV) Multipurpose Vehicles (MPV) Passenger Vehicles Commercial Vehicles (CV Light Commercial Vehicles LCV, Medium and Heavy Commercial Vehicles MHCV) Two wheelers Three wheelers Tractor and Farm EquipmentFor the purpose of the strategic analysis, this project report focuses only on the following three segments where Mahindra has a strong presence: Sports Utility Vehicles (SUV) Commercial Vehicles Tractor and Farm Equipment

Sports Utility Vehicles

Industry BackgroundThe Indian SUV industry has different customer segmentations across different price points. The price range from SUV can start from INR 5 lakh and goes up to INR 2 crores. All the leading global brands have a presence in this segment and have a cut throat competition. Depending on how to look at the segments based on price range, each category has a different leading brand/model. For example in price segment 15-25 lakhs, Toyota Fortuner rules the marker with 61% market share.Generic Strategies Analysis

Mahindra is the largest SUV manufacture in India. If we consider the passenger cars as a whole segment, then it is working as a focus strategy in a niche of sports utility vehicle. Further inside the SUV segment, it is not covering the whole range. It has the leading presence in price bracket of INR 6-15 lakhs with its best-selling model Bolero and 12 lakhs+ with Mahindra XUV etc. It has also made an entry in INR 20 lakhs bracket with Mahindra Ssangyong Rexton model which is built along with South Korean auto major Ssangyong. M&M does not have any presence in the new emerging compact SUV segment (less than 4 meter length) which is currently ruled by Ford Ecosport. A list of the major brands and models at different price point is given below to explain the price range characteristics of the SUV market in India.Price RangeModels / Brands

INR 4-6 LakhsPremier Rio, Maruti Gypsy, Mahindra Quanto

INR 6-8 LakhsMahindra Bolero, Tata Sumo, Ford Ecosport

INR 8-10 LakhsMahindra Scorpio, Renault Duster, Chevrolet Tavera, Tata Safari, Nissan Terrano, ForceOne SUV,

INR 10-15 LakhsMahindra XUV 500, Tata Safari Storme

INR 10-15 LakhsMahindra Ssangyong Rexton, Skoda Yeti

INR 15-25 LakhsMahindra Ssangyong Rexton, Ford Endeavour, Mitsubishi Outlander, Honda CRV, Toyota Fortuner, Maruti Suzuki Grand Vitara, Mitsubishi Pajero

INR 25 Lakhs 2 CroresAudi Q Series, BMW X Series, Land Rover, Range Roverm Mitsubishi Montero, Volvo XC60, Mercedes Benz ML Class, Porsche Cayenne

External Analysis (PESTEL)

The analysis of the external environment is done based on the PESTEL framework for the Indian economic environment.

Political Formulation of Automotive Mission Plan 2006-2016 for Development of Indian Automotive Industry by Ministry of Heavy Industries and Public Enterprises Government of India Policy Paralysis, elections are nearing, so no major decision happening Interference in labor relations, land allocation (Tata Nano Singur case, Maruti Manesar Plant case) Coalition Govt, no clarity on next election results as per polls resulting in unclear and unstable environment regarding policies Petrol and diesel subsidies removed, market linked pricing

Economic Volatility in inflation, the high interest rates resulting on costlier loans thus reducing the demand Global and local slowdown in demand by consumers for the fiscal 2013-2014. The GDP expected to rise around 5%, Automobile accounts for 22% of the Indias GDP The finance minister in the 'Vote on Account' (interim budget 2014) has announced excise duty cut from 30% to 24% for SUVs for the period up to June 30, 2014 to stimulate demand. Mahindra and Mahindra has passed this reduction to consumers by reducing the prices on its models from INR 13,000 to INR 49,000. The other competitors have also done the same. Approval of 100% foreign direct investment (FDI), no minimum investment criteria, full de-licensed industry Considerable gap (INR 20-25 per litre) between the prices of diesel and petrol The performance of Indian automotive industry was significantly lower than the 10-12% growth projected by SIAM (Society of Indian Automobile Manufacturers) in 2012-2013. At year end it was just 2.6%. However, for UV segment saw the record growth of 52.2%.

Socio Cultural Increased per capita income inducing higher demand of the vehicles Growth in urbanization Preference for small, compact, fuel efficient cars for driving in city, for adventure driving preference for SUV SUV as a power symbol, mostly in north India, political and business power people prefer SUV over sedans Fuel efficiency still an important factor while buying a vehicle

Technological Efficient engines -> better fuel efficiency Global and Local innovation to meet customer demands introduction of fuel efficient and less polluting engines, e.g. Mahindra mHawk Alternative fuels such as CNG, PNG, electric vehicles, hybrid vehicles Consumer demand for features such as Bluetooth, hands free, touch enabled music / dvd systems, parking sensors etc.

Environmental Strict emission norms (Bharat stage IV at present) over the last decade Awareness about environmental impact of fuel emissions on consumers purchase Alternate fuels CNG, LPG, electric, Hybrid vehicles

Legal Legal provision for environment pollution Issues with unions (manesar plant) and land allocation for plants (singur case) Issues with pollution generated by manufacturing plants, vehicles, wastage treatment etc. (laws related to Air, Noise, Water pollution etc.) International laws applicable for patent and brand theft

Internal Industry Analysis (Porters Five Force Model)

Threat of New Entrants Economies of scale High barriers for entry and exit (High risky returns) High switching cost (in terms of changing vehicles) Capital intensive industry, requires money and time investment, e.g. for setting up a distribution, dealers and after sales service network

Bargaining Power of Suppliers Large number of auto parts suppliers available, hence we can assume that the power is lowBargaining Power of Customers The bargaining power of customers differs from segment to segment (price range based) Bargaining power of customers is moderate in the SUV segments, however emerging the sub compact SUV segment is increasing the power of the customers. In the premium UV segments it is mostly about style and comfort and consumers are not price sensitive

Threat Of Substitutes There is no immediate threat of substitutes. In India, the substitutes are trains, air travel and public transport. However the quality of these alternatives is not upto the mark in terms of cost, quality, reliability and availability to connect to last mile. Another point to note is that the threat of substitute mostly affects before a consumer buys the vehicle, after that it diminishes considerably due to high switching cost (the used vehicles do not command much price for reselling)RIvalry In the Industry High intense competition, many Indian origin and multinational players in all segments , across different price points Nine of top ten global automotive manufactures present in India In The UV segment, almost every manufactures has launched products in last 2-3 years in direct competition with Mahindra at different price points such as Ford Eco sport, Renault Duster, Maruti Ertiga etc. A new compact UV segment is emerging with high growth potential where Mahindra dont have a strong presence as of now. However they are developing many models in this segment (Code named S101, S102 and U301)

Value Chain Analysis

Primary Activities

Inbound Logistics Mahindra uses a fully functional optimized SCM solutions and offers it to its customers (suppliers, distributors) to optimize the whole value chain in areas of transportation, warehousing, VAS etc.

Figure: A pictorial depiction of line feeding at MahindraOperations Greenfield facility at Chakan, near Pune (Maharashtra), designed for flexibility and eco-friendly with 10,000 trees planted and current capacity of 3.2 million. Flexible manufacturing to change to the customer needs Efficient and optimized operations processes such as JIT, cost reduction using solar energy.Outbound Logistics Transportation process optimized both inbound and outbound flows of material and goods across industries, product types and geographies. Usage of primary, secondary and tertiary transportation Extensive use of IT such as MILES (transport management solution, based on Oracle Transport Management System (OTM) and WMS (A warehouse management system developed in-house). Sufficiently scalable and flexible to meet most requirements. Marketing and Sales Significant efforts towards strengthening Mahindra brand. Won American Marketing Association (AMA) website of the year (B2C) crystal award. Mahindra Renault received the Integrated Marketing Campaign of the Year award. A very strong concept of Mahindra Rise in the center of all the marketing efforts. Marketing efforts based on segmentation such as very famous marketing and advertising campaign Cheetah based XUV500.

Service Mahindra has focused on the customer centricity. The efforts have resulted in the most improved brand in JD Power CSI study in 2012. Network expansion to reach 70% of all districts in India, in most remote locations such as Kargil, Port blair etc. covering the whole of India. Mahindra XUV500 receives 'Total Customer Satisfaction Award' from TNS Automotive

Secondary Activites

Firm Infrastructure No legal issues reported or pending as per annual report 2013. Fair accounting and legal practices CSR activities, sustainability and social initiatives Human Resource Management Mahindra recognizes its employee as the vital and most valuable assets. Focus on employee centric shop floor practices, training and development. Safety, Occupational health and environment policies in place to safeguard employees. Highly trained staff in plants, regular medical check-up, and consultation and counselling of employees. Total number of employees (For Mahindra group) as per 2013 annual report 34612. Results of employee grievances nothing is pending, no child labor reported, 5 sexual harassment reported, all resolved and no complaint on discriminatory employment. Technology Development Operation related energy savings by switching to induction lamps, shifting to CED technology from AED technology in paint shop to reduce the running hours Rain water harvesting, recycling of water, robotic painting for optimization, waste reduction In house R&D, Mahindra Research Valley developed the XUV500. Micro hybrid/CNG variants of different models New and improved technology up-gradation resulting in new features e.g. XUV500 has features of Hill hold control, ESP, multiple air bags etc. Extensive use of IT solutions to manage the business SAP ERP, Business analytics, Siemens PLM

Procurement

Mahindra EPC as procurement expertise Tie up with many suppliers for the inputs, raw materials, supplies Mahindra helps the suppliers to optimize the value chain

Resource Based View AnalysisIn the following section, we will analyze the resources of M&M for SUV segment and check for their sustainable advantage using VRIO framework.Tangible Resources

Valuable?Rare?Inimitable?Organization Capability?

Financial

Huge profits (3350 Cr) and cashYesNoNoYes

Equity capacityNoNoNoYes

Borrowing capacityNoNoNoYes

Physical

Plant and FacilitiesYesNoNoYes

Favorable Manufacturing locationsYesNoNoYes

Technological

Production ProcessYesNoNoYes

Patents and trademarksYesYesYesYes

Organizational

Evaluation and Control SystemsYesNoNoYes

Strategic PlanningYesNoNoYes

Intangible ResourcesValuable?Rare?Inimitable?Organization Capability?

Human

Skills and capabilitiesYesNoYesYes

Firm specific skillsYesYesYesYes

Innovation and Creativity

Technical SkillsYesNoNoYes

InnovationYesYesYesYes

Reputation

BrandYesYesYesYes

Reputation with customers YesYesNoYes

Corporate Level Strategy

At present Mahindra group is highly diversified group in related as well as unrelated segments. As far as history goes, Mahindra started in 1945 as steel company in Mumbai. After independence, they started to manufacture the iconic brand Willys Jeep. The founders believe that the new modes of transportation are the key and in those times the Indian terrains were rugged. So they started with building simple and enduring vehicles with collaboration of wide range of international companies. In the last six decades Mahindra has moved to tractors, telecom, IT, hospitality, retail, financial services and many other segments. Mahindra as a group has followed almost all the strategies for diversification such as vertical, horizontal and global. They have grown organically, strategic alliance (Renault), merger and acquisition (G R Grafica Ricerca Design S.r.l (GRD), an Italian auto designing, body engineering and feasibility and styling company; South Korea's SsangYong Motor Company), and a controlling stake in Reva Electric Vehicles. Mahindra has followed the adjacency strategy to start with and later they have diversified in unrelated diversification such as in IT (Mahindra Telecom, Mahindra Satyam) and hospitality (Mahindra Resorts). The breakup of revenues is given below for different segments. Based on the revenue generation we can put Mahindra Group in Related Linked level of diversification.

For the automotive sector (including UV. MPV, LCV etc0, a summary is given below that compares the performance of Mahindra and Mahindra along with industry growth and market share:

Tractor And Farm Equipments

Internal Industry Analysis (Porters Five Force Model)

Threat of New Entrants Economies of scale High barriers for entry and exit High switching cost (in terms of changing vehicles) High industry attractiveness due to growth rate of the segment and scope of growth in the agricultural industry Bargaining Power of Suppliers Bargaining power is not high Large number of parts suppliers available

Bargaining Power of Customers In the farm equipment industry, customers look value for money Switching cost are high for the customersThreat Of Substitutes Indian Agriculture is moving towards increased usage of machinery in farming and agricultural activities for increased output and productivity. Thus, the threat of substitute doesnt exist and industry is in growth phase of life cycleRIvalry In The Industry High competition, many domestic players and growing interest from international players owing to evolving trade policies and attractiveness of the industry There are more than half a dozen domestic players (TAFE,M&M, ITL, Escorts etc. ) and international players (Deere & Co., CNH Global, AGCO etc.) have forayed into Indian market Decline in operating margins for key players owing to high material cost and competitive pressure.

Factorsaffecting the choice of tractors

A summary of the factors that have an impact on the purchase of tractors is given below:

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